Community property with right of survivorship

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Goro
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Community property with right of survivorship

Post by Goro »

Hi,

We noticed our Vanguard account is Joint tenants with right of survivorship. We are thinking to change it to Community property with right of survivorship.
Changing account type, will it cause any extra work during tax return?
By the way, we live in CA.

J&K
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LadyGeek
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Re: Community property with right of survivorship

Post by LadyGeek »

This thread is now in the Personal Finance (Not Investing) forum (property rights).
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inittowinit
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Re: Community property with right of survivorship

Post by inittowinit »

Best advice for re-titling assets of any consequence is to consult with an estate attorney in your state. Free internet legal advice is worth exactly what you pay for it.
BogleTaxPro
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Re: Community property with right of survivorship

Post by BogleTaxPro »

Goro wrote: Thu Sep 24, 2020 2:27 am
Changing account type, will it cause any extra work during tax return?
My experience has been that for a change in title, Vanguard will create a new account number and transfer the assets in-kind to the new account. The only tax implication is bookkeeping. You may get 2 1099's next year--one for each account--for any dividends or capital gains received before/after the transfer. Don't sum them up. Enter both (separately) into your tax software and you'll be okay.

There are some LEGAL implications of changing from Joint to Community, but I am not a lawyer so you may want to seek expert advice there.
Topic Author
Goro
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Re: Community property with right of survivorship

Post by Goro »

Hi,

Thank you.

We understand there are some legal implications to change title.

If we do in kind transfer, will the new account have the previous cost basic info? We are using specific lot method.
BogleTaxPro
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Re: Community property with right of survivorship

Post by BogleTaxPro »

Goro wrote: Thu Sep 24, 2020 10:43 am If we do in kind transfer, will the new account have the previous cost basic info? We are using specific lot method.
I don't do specific lot method so I don't know the answer to that. I know that in my case (and this was a couple of years ago), the regular cost basis did transfer over correctly. You may have to ask Vanguard, unless someone else chimes in. Oh, and since this is a 'new' account be sure to check your 'new' account settings and make sure your reinvestment options/notifications/other account management features still reflect what you want. Sometimes those don't transfer over automatically.
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Goro
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Re: Community property with right of survivorship

Post by Goro »

BogleTaxPro wrote: Thu Sep 24, 2020 1:05 pm
Goro wrote: Thu Sep 24, 2020 10:43 am If we do in kind transfer, will the new account have the previous cost basic info? We are using specific lot method.
I don't do specific lot method so I don't know the answer to that. I know that in my case (and this was a couple of years ago), the regular cost basis did transfer over correctly. You may have to ask Vanguard, unless someone else chimes in. Oh, and since this is a 'new' account be sure to check your 'new' account settings and make sure your reinvestment options/notifications/other account management features still reflect what you want. Sometimes those don't transfer over automatically.
Hi

Thank you so much for your advise.
Actually I noticed we did not have so many lots because we did loss harvesting this year and we bought one different fund at once.
Anyway, really thank you!
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FIREchief
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Re: Community property with right of survivorship

Post by FIREchief »

I doubt the account title makes any difference. It's typically state law, and not account titles, that determine if an asset is community property. Some lawyers will even include a community property declaration within an estate plan package that declares all property owned by the married couple to be community property. I've read that the IRS will accept such a document as sufficient evidence for a stepped up basis on appreciated property. See my signature.
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Luckywon
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Re: Community property with right of survivorship

Post by Luckywon »

Goro wrote: Thu Sep 24, 2020 2:27 am Hi,

We noticed our Vanguard account is Joint tenants with right of survivorship. We are thinking to change it to Community property with right of survivorship.
Changing account type, will it cause any extra work during tax return?
By the way, we live in CA.

J&K
One thing to keep in mind is that the "right of survivorship" is significant as if the account is titled as community property without right of survivorship, a deceased spouse's half share will be subject to probate. Last time I inquired, about 2 years ago at Etrade, there was no option for accounts titled as community property to have right of survivorship. For this reason, they advise married couples to title accounts as JTWROS if there is a desire to avoid probate. At Schwab, the default for community property accounts is that they do not have ROS. ROS can be designated, but it must be specifically elected.
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