Most real estate owned by more than one person is held as “joint tenants with rights of survivorship.” This is more or less the default setting for holding title, especially among married and unmarried couples. Unfortunately, it is probably the worst way to hold title, for a number of reasons:

Probate is deferred, not avoided

  1. You can lose tax benefits on appreciated property held by married couples
  2. You lose the opportunity to provide asset protection for the surviving spouse
  3. You lose the opportunity to provide asset protection for your heirs.
  4. You lose the opportunity to provide for children from prior marriages.

1. Won’t Joint Tenancy Avoid Probate?

No. It merely defers probate until the death of the second person. A probate will still be required upon the death of the second joint tenant. The best way to avoid probate is to create a revocable living trust to hold title to your assets.

2. Loss of Tax Benefits for Appreciated Property Held by a Married Couple

Under Nevada law, property held in joint tenancy is deemed to be separate property owned one half by each spouse, not community property. Community property has distinct tax advantages over separate property, most notably a step-up in basis on both halves of the community property upon the death of the first spouse.

The effect of this is that a surviving spouse can sell any appreciated community property after the death of his or her spouse, and all capital gains are eliminated. All proceeds are tax-free. It just doesn’t get any better than that – no taxes.

It’s a completely different result for the sale of property held in joint tenancy. Only one half of the property receives a stepped-up basis. Stated another way, only half of any capital gains are eliminated. Half of the gain is retained.

To illustrate, if a couple held property in joint tenancy with a built-in capital gain of $100,000 and spouse #1 dies, when the survivor sells the property, there is a $50,000 capital gain. If the property were held as community property, the gain would be zero.

3. How Can You Avoid Capital Gains?

How you avoid capital gains is to hold the property as community property instead of separate property (joint tenancy).

There are two main options to have your assets be community property: (1) hold your assets in a living trust, or (2) hold title as community property with rights of survivorship (CPWROS). NRS 111.064.

The Nevada legislature enacted this statute clear back in 1981 to afford us as Nevada residents the opportunity to have the right of survivorship feature of joint tenancy while retaining the favorable tax treatment of community property. Yet this favorable way to hold title is rarely used.

4. Loss of Asset Protection for Surviving Spouse

As stated above, the best way to avoid probate is to hold title to your assets in a living trust. Not only will this avoid probate, but you can provide complete asset protection for the surviving spouse or surviving partner for the assets received from the deceased spouse or partner.

This can easily be done by simply creating a standard A/B Trust. The surviving spouse maintains complete control over use and benefit of the assets throughout his or her life, yet they are 100% protected.

5. Loss of Asset Protection for Your Heirs

Similar to protecting your assets for your spouse or partner, your entire estate can be held for your heirs or beneficiaries 100% protected for them throughout their lives. This inherited property can remain their separate property regardless of whether they are married or single. It can serve as a built-in “prenuptial” agreement maintaining all inherited assets as their separate property in case of a divorce.

Assets can further be 100% protected from any and all claims against your beneficiaries throughout their lives.

This can be very simply and easily accomplished by setting up trusts for your children or other beneficiaries within your living trust. You lose all these opportunities for asset protection if you merely hold your properties in joint tenancy.

6. No Protections for Children from Prior Marriages

One of the real, hidden drawbacks of holding property in joint tenancy is that children from a prior marriage will likely get disinherited.

For example, suppose a couple has two children together, and the wife has a child from a prior marriage. The wife dies first. All property held in joint tenancy automatically passes to her husband. Upon his subsequent death, her child from her prior marriage is not one of his heirs at law and inherits exactly zero from him.

If the intent of the couple is to provide for all three children, the best way to accomplish this is to hold their property is a living trust.

7. Never Hold Property in Joint Tenancy with a Child

If joint tenancy is bad for couples, it’s much, much worse between a parent and a child. Why?

1. Your property can be attached by any creditor of your child.

If your child gets divorced, is in a car wreck, has unforeseen medical expenses, has a business failure, files bankruptcy, etc., your property can be attached by the creditors of your child.

2. You lose the ability to eliminate capital gains on appreciated property.

What’s bad for couples gets much worse when children are involved. If the surviving spouse (mom or dad) holds his or her assets in a living trust, 100% of capital gains are eliminated on appreciated property. The kids can inherit all assets, completely income tax-free.

For joint tenancy between a parent and one child, half of the capital gains are retained. When two children are on title, two-thirds of the gain is retained. For three children, three-fourths of the gain is retained, etc.


Holding property in joint tenancy is likely the worst possible way to hold title to property. Yet, amazingly, that seems to be the standard in our community. Holding title to your property in a living trust can provide far greater protection for you and your heirs and avoid the myriad problems discussed above.