- Sole ownership or fee simple ownership: The entirety (100%) of the property steps-to fair market value under Section 1014 upon death of the sole owner, excluding Income in Respect of a Decedent (IRD) property. The deemed contribution rule does not apply. 100% of the fair market value is included in the gross taxable estate and potentially the probate estate of the decedent. 100% of the property will be transferred via the probate process unless it is transferred exclusive of the probate process by state contract law or trust law. The unlimited marital deduction only applies if the beneficiary of the property transfer is the surviving spouse (applicable to surviving U.S. citizen spouses). The property may be transferred or partitioned freely during lifetime.
- Tenancy in common: Applies to 2 or more related or unrelated tenants. That portion of the property owned by the decedent (typically the actual percentage of contribution) steps-to fair market value under Section 1014 upon death of each tenant, excluding IRD property. The deemed contribution rule does not apply. The fair market value of property multiplied by the percentage of ownership by the decedent is included in the gross taxable estate and potentially the probate estate of the decedent. The decedent’s ownership share of the property will be transferred via the probate process unless it is transferred exclusive of the probate process by state contract law or trust law. The unlimited marital deduction only applies if the beneficiary of the property transfer is the surviving spouse (applicable to surviving U.S. citizen spouses). The property may be transferred or partitioned freely during lifetime without consent of co-tenants.
- Joint tenancy with right of survivorship (JTWROS): Applies to 2 or more related or unrelated tenants. That portion of the property owned by the decedent (ownership is in equal shares) steps-to fair market value under Section 1014 upon death of each tenant, excluding IRD property. The deemed contribution rule applies if joint tenancy is held by spouses, where contribution and ownership is deemed to be 50% for each spouse. The fair market value of property multiplied by the actual percentage of contribution by the decedent (or deemed 50% contribution in the case of spousal joint tenants) is included in the gross taxable estate of the decedent, though excluded from the decedent’s probate estate. The decedent’s ownership share of the property is transferred exclusive of the probate process to the surviving tenants in equal portions. The unlimited marital deduction only applies if the beneficiary of the property transfer is the surviving spouse (applicable to surviving U.S. citizen spouses). The property may be transferred or partitioned freely during lifetime without consent of co-tenants (though consent of all tenants is required for JTWROS to apply after transfer to a new joint ownership, otherwise interests revert to tenancy in common).
- Tenancy by the entirety: Only applies to spouses in states recognizing tenancy by the entirety. That portion of the property owned by the decedent (50%) steps-to fair market value under Section 1014 upon death of each spouse, excluding IRD property. The deemed contribution rule applies, where contribution and ownership is deemed to be 50% for each spouse. Half of the fair market value is included in the gross taxable estate of the decedent, though excluded from the decedent’s probate estate. The decedent’s ownership share of the property is transferred exclusive of the probate process to the surviving spouse. The unlimited marital deduction applies (applicable to surviving U.S. citizen spouses). Lifetime transfer or partition of the property requires consent of both spouses.
- Community property ownership: Only applies to spouses in community property regime states. The entirety (100%) of the community property jointly owned by the decedent and surviving spouse steps-to fair market value under Section 1014 upon death of the first to die spouse, excluding IRD property. The deemed contribution rule applies, where contribution and ownership is deemed to be 50% for each spouse. Half of the fair market value is included in the gross taxable estate and potentially the probate estate of the decedent. The decedent’s ownership share of the property will generally be transferred via the probate process (certain states may offer an automatic right of survivorship option exclusive of the probate process, including California and Texas) unless it is transferred exclusive of the probate process by state contract law or trust law. The unlimited marital deduction only applies if the beneficiary of the property transfer is the surviving spouse (applicable to surviving U.S. citizen spouses). Lifetime transfer or partition of the property requires consent of both spouses.