Planning For Unmarried Couples
Charlene M. Ives, CPA, PC
Friday January 20, 2006
Titling of property can be a particular challenge for unmarried couples.
Generally, joint tenancy works well for unmarried couples who purchase property. Reasons: probate will be avoided, since a one tenant's share passes to the other tenant automatically upon one partner's death. However, for tax purposes, a disadvantage of joint tenancy is that capital gains can be greater when the property is sold, because the surviving partner does not get a step up in basis in the property. Also, it can be difficult to show who paid what for improvements, etc. to the property, for the purpose of calculating basis, or "investment" in the property. Yet, when the property is a personal residence, basis and capital gains concerns are greatly diminished because of the generous gain exclusion rules for residences.
Therefore, joint tenancy can work well for unmarried partners who intend that property pass to their partner, and not to other family members. Higher income unmarried partners with taxable estates should consider gift tax issues associated with jointly held property, and may be better off holding the property in other than joint tenancy.
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