Community property is treated preferentially by the tax code — it gets a full step-up in basis at death, instead of only stepping up the decedent’s half as in joint tenancy. (Could also step down if the market timing is unlucky, but that is rare.)
While couples in non-community property states often seek out advanced trust arrangements that allow them to take advantage of community property laws, it is amazing to see so many California couples still holding property as joint tenants, failing to take full advantage of California’s community property laws. This is potentially a very costly tax planning mistake, one which can easily be corrected by your estate planning attorney.
Community property trusts can save your clients tens of thousands of dollars in capital gains taxes, and that is just one of their many benefits. This lesser-known strategy is not necessarily the best fit for all couples either because of their assets or state of residence. However, for households you work with that can make the most of them, it is a planning tactic that could have a significant impact on keeping more of the value of their estates in the family.