Community property can be a problem. However, it can also keep property within the family.
Despite the bad reputation of community property, based on television and movies, the facts are that there are capital gains tax advantages to community property. Everyone can take advantage of them by creating a community property trust, according to Wealth Management in “What Is Community Property and What Are Community Property Trusts?“
The fact is that only nine states have community property laws, which is a special way that married spouses hold title to property they received through joint effort.
The big advantage of a community property trust is that assets held in such a trust, can receive a double step-up in basis for capital gains tax purposes. When one spouse passes away and the other inherits the assets, all of the assets receive a full step-up in basis. This often results in little or no capital gains tax, when such assets are later sold.
Only two states, Alaska and Tennessee, allow community property trusts, but you are not required to live in those states to create trusts there.
An estate planning attorney can guide you in creating an estate plan that meets your unique circumstances which may include a community property trust.