California is one of nine community property states in the United States. Under state law, all property acquired by either spouse during the marriage while domiciled in California is community property, owned equally by both spouses regardless of whose name appears on the title or account. This rule has significant implications for estate planning: both spouses hold an undivided one-half interest in all community property, and each has the right to dispose of their half by will or trust.
Community property typically includes:
- Wages and salaries earned by either spouse during the marriage
- Real estate purchased during the marriage with marital funds
- Retirement account contributions made during the marriage
- Business income and assets generated during the marriage
What Counts as Separate Property
Not all property owned by a married California resident is community property. Separate property includes assets owned before the marriage, gifts and inheritances received by one spouse during the marriage, and income generated by separate property. Keeping separate property separate requires careful documentation, and commingling it with community funds can cause it to lose its separate character.
How Community Property Affects What You Can Leave at Death
Because each spouse owns one-half of all community property, estate planning must account for the fact that only your half is yours to give away. You cannot leave your spouse’s share to someone else, and you cannot leave more than your half of a community asset to anyone other than your spouse without their consent.
This creates planning considerations that differ from what residents of common-law property states face. A Roseville estate planning lawyer regularly works with married couples who assumed they could leave all jointly titled assets to their children and discovered the ownership picture was more complicated than expected.
The Stepped-Up Basis Advantage
One of the significant tax advantages of California’s community property system is the full stepped-up basis at the death of either spouse. When community property passes at death, the entire asset receives a new cost basis equal to its fair market value at the date of death, not just the deceased spouse’s half. This means the surviving spouse can sell the asset with little or no capital gains tax liability.
This benefit does not apply to assets held as joint tenancy rather than community property, even between spouses. The distinction matters for long-term tax planning.
Yee Law Group Inc. advises Roseville couples on how to hold assets and structure their estate plans to take full advantage of California’s community property rules.
Registered Domestic Partners
California extends community property rights to registered domestic partners under the same framework that applies to married couples. Partners who have registered with the California Secretary of State are subject to the same community property rules, the same stepped-up basis treatment, and the same estate planning considerations.
How Registration Affects Planning
Registered domestic partners who have not updated their estate plans to reflect community property ownership may have documents that no longer accurately reflect who owns what. Reviewing and updating the plan after registration is recommended to avoid inconsistencies.
Planning for Your Community Property in Roseville
Understanding how community property rules affect your estate is foundational to creating a plan that works. Speaking with a Roseville estate planning lawyer gives you a clear picture of what you own, what you can leave to whom, and how to structure your plan to minimize taxes and avoid conflict. Our team is ready to walk through your specific situation.