The Four Ownership Types
How property is titled determines probate exposure, estate tax inclusion, creditor protection, and basis step-up. The CFP exam tests all four types.
| Ownership Type | Survivorship Rights? | Probate? | Gross Estate Inclusion | Creditor Protection |
|---|---|---|---|---|
| JTWROS | Yes — surviving owner gets it | No | Full value (non-spouse); 50% (spouse) | Individual creditors can reach proportionate share |
| Tenancy in Common | No — goes to heirs/estate | Yes | Proportionate share | Individual creditors can reach proportionate share |
| Community Property | No (unless JTWROS elected) | Yes (typically) | 50% in gross estate | Community debts can reach community property |
| Tenancy by Entirety | Yes | No | 50% (typically) | Protected from one spouse's individual creditors |
JTWROS (Joint Tenancy with Right of Survivorship)
- Surviving joint tenant automatically owns the entire property on first tenant's death.
- Passes outside probate — not affected by the deceased's will.
- Gross Estate inclusion: For non-spousal joint tenancies, the IRS includes the full FMV unless the survivor can prove their contribution. For spousal JTWROS, only 50% is included in each estate (regardless of who paid for it).
- All four unities required: time, title, interest, and possession.
Memory Trick: "JTWROS = Joint Tenants Who Refuse Our Separate interests." All tenants have equal, undivided interest — you cannot leave your share to someone else by will.
Tenancy in Common (TIC)
- Each co-owner holds a fractional, divisible interest. Shares need not be equal.
- No survivorship rights — each owner's share passes through their estate (probate).
- Can be devised (given) to anyone via will.
- Default form of co-ownership in most states when JTWROS language is absent.
Community Property (9 States)
States: AZ, CA, ID, LA, NM, NV, TX, WA, WI
- Property acquired during marriage is owned 50/50 by each spouse, regardless of whose name is on the title.
- Separate property (owned before marriage or received by gift/inheritance during marriage) remains separate if not commingled.
- Step-up in basis advantage: At death, the entire community property gets a full step-up in basis to FMV — both halves, not just the deceased's half.
Exam Tip: Community property's full step-up in basis is a major planning advantage. If a couple holds highly appreciated stock as community property, the surviving spouse gets a full step-up on 100% of it. JTWROS only gets a step-up on the deceased's half.
Tenancy by the Entirety
- Available only to married couples (and in some states, domestic partners).
- Similar to JTWROS — survivorship rights, avoids probate.
- Key difference: creditor protection. Neither spouse alone can sever the tenancy. A creditor of only one spouse cannot force a sale or attach the property.
- Both spouses must agree to convey the property.
- Available in about half the states.
Basis Rules Summary
| Ownership | Basis at Death |
|---|---|
| JTWROS (non-spouse) | Step-up only on deceased's proportionate share |
| JTWROS (spouses) | Step-up on deceased's 50% |
| Community Property | Full step-up on 100% of community property |
| Tenancy in Common | Step-up on deceased's fractional share |
| Separate Property | Full step-up on the entire asset |