{"id":1254,"date":"2021-02-19T10:00:10","date_gmt":"2021-02-19T15:00:10","guid":{"rendered":"https:\/\/www.deeds.com\/articles\/?p=1254"},"modified":"2024-04-25T23:20:03","modified_gmt":"2024-04-26T03:20:03","slug":"on-the-rise-and-protected-from-prop-19-the-interspousal-deed-in-california","status":"publish","type":"post","link":"https:\/\/www.deeds.com\/articles\/on-the-rise-and-protected-from-prop-19-the-interspousal-deed-in-california\/","title":{"rendered":"On the Rise (and Protected From Prop 19): The Interspousal Deed in California"},"content":{"rendered":"\n
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A quitclaim deed is sometimes used for transferring a home between\nspouses, but another option in some states is the interspousal transfer\ngrant deed<\/em> (\u201cinterspousal deed\u201d). It, too, can pass a house between spouses\nwithout a sale. The interspousal deed, whose entire purpose is to change the\nownership on the title, is the preferred instrument for couples in California. <\/p>\n\n\n\n

\u261b<\/strong> You\ncan find California\u2019s interspousal grant deed here<\/a>. <\/strong><\/p>\n\n\n\n

Traditionally, interspousal conveyances are not subject to\ngift or transfer taxes. But in 2021 you might ask: What about California\u2019s Proposition\n19? Will that trigger a tax reassessment on interspousal transfer grant deeds now?\nThe short answer is no.<\/p>\n\n\n\n\n\n\n\n

First, a Few Words on Prop 19\u2026<\/h2>\n\n\n\n

This month, Proposition 19 took effect. This is the Home\nProtection for Seniors, Severely Disabled, Families and Victims of Wildfire or\nNatural Disasters Act.<\/em> <\/p>\n\n\n\n

Note that under Proposition 13 (effective since 1978),\nCalifornia properties are taxed based not on fair-market value but on assessed\nvalue, which caps tax hikes at 2% annually, unless and until the title is\ntransferred by a deed. Proposition 13 has served Californians for decades as a shield\nagainst heavy taxation on their rising property valuations. It will continue in\neffect. <\/p>\n\n\n\n

That said, the new Proposition 19 brings several significant\nchanges to property tax. For one thing, under Proposition 19, heirs to family\nproperties must live in them, as primary residences<\/em>, to keep their low\nproperty tax basis. This part went into effect on Feb. 16, 2021, and it impacts\nCalifornia real estate even if it\u2019s held in a qualified\npersonal residence trust (QPRT)<\/a>. It will result in serious tax\nincreases for heirs in California as they face property tax reassessments in\nthe years ahead. <\/p>\n\n\n\n

As Proposition 19\u2019s full title indicates, there will be (effective Apr. 1, 2021) property transfer tax relief for people with disabilities or aged 55+, and for people who have suffered from a wildfire or other disaster. Read Proposition 19 here<\/a>. <\/p>\n\n\n\n

A full examination of Proposition 19 is beyond the scope of\nour present article. But here\u2019s the main thing for spouses to know:<\/p>\n\n\n\n

Because spouse-to-spouse conveyances don\u2019t fall under the\nlegal change-of-ownership category, they do not<\/strong> undergo a property tax\nreassessment. Similarly, transfers of real property between partners in a\nregistered domestic partnership will not <\/strong>require a change-of-ownership\nreassessment.<\/em><\/p>\n\n\n\n

Why Couples in California Opt for the\nInterspousal Deed<\/h2>\n\n\n\n

In California, interspousal deeds are the preferred form of conveying a house into community property \u2014 or to one person in a divorce. First, note that neither party may transfer title to the marital home pending divorce. Once the petition for divorce is filed and the other party served with process, an automatic temporary restraining order<\/a> bars anyone from conveying the home without the divorce court\u2019s authorization or a written agreement signed by both sides. This goes for all real estate, even if it\u2019s separate property.<\/p>\n\n\n\n

Because California is a community property state, there\u2019s a\npresumption that the value of a home would be equally distributed in divorce. But\nco-owned property can be transferred in divorce proceedings with the court\u2019s\npermission. In 2018, in the case of In re Marriage of Kushesh and\nKushesh-Kaviani<\/em>, the California appeals court held that interspousal deeds supply\neffective language to \u201ctransmute\u201d property from community to sole property \u2014\naverting later challenges on duress grounds. <\/p>\n\n\n\n

\u261b<\/strong> Important note:<\/em><\/strong> Court holdings\nstate general legal rules. Yet factors can vary from case to case. In divorce,\nbe sure there is a lawyer on each side to represent each party\u2019s interests. Work\nwith your lawyer on a comprehensive plan to address the ownership and control\nof your real estate and all assets. <\/p>\n\n\n\n

Another reason an owner may prefer the interspousal deed\nover the quitclaim is the clarity an interspousal deed provides regarding the\nmortgage. With an interspousal transfer grant deed, a spouse can transfer an\ninterest in the shared home and be sure that there is no future liability for debts\nsecured by the home.<\/p>\n\n\n\n

That said, there are alternative ways of transferring a home\nwith a mortgage, such as one partner using their equity to buy out the other,\nand having the person who keeps the house refinance it into their own name and\nmortgage. Or the couple can opt to sell the house to a third party and divide\nthe sale proceeds.<\/p>\n\n\n\n

Other Scenarios for the Interspousal Deed<\/h2>\n\n\n\n

In\nCalifornia, the interspousal grant deed<\/a> does not trigger a\nreappraisal. Nor does it constitute a taxable transfer. It can be used, of\ncourse, to convey or create interests between co-owning spouses. There are a\nnumber of specific scenarios in addition to the ones we have already mentioned.\nFor a few additional examples, the interspousal deed could be used to:<\/p>\n\n\n\n