Understanding California’s Community Property Laws in Estate Planning

Short answer: California is a community property state, and that status changes two things for your estate plan: what your spouse automatically owns without any planning, and how much of a tax break your heirs get when they later sell an inherited asset. For community property, both halves of the asset get a step-up in basis to fair market value when the first spouse dies, not just the deceased spouse’s half. Under joint tenancy, only the decedent’s half steps up. That difference alone can be worth real money to your heirs.

What counts as community property in California?

Community property is, generally, anything either spouse earns or acquires during the marriage: wages, retirement contributions made during the marriage, a house bought with marital income, a business built up while married. It does not matter whose name is on the paycheck, the deed, or the account. Both spouses own an equal, undivided interest.

Separate property is the other category: anything either spouse owned before the marriage, plus anything either spouse received during the marriage as a gift or an inheritance to that spouse alone. Separate property stays separate unless the spouses agree otherwise or the asset gets mixed together with community funds to the point it can no longer be traced.

What happens to community property if I die without a plan?

If a married Californian dies without a will or trust, California’s intestate succession rules decide who inherits, not the decedent’s preferences. For community and quasi-community property, the surviving spouse takes all of it: their own existing half plus the decedent’s half. That rule comes from Probate Code § 6401(a)-(b).

Separate property works differently under intestacy. The surviving spouse’s share of separate property depends on who else survives: all of it if there are no surviving children, parents, or siblings; half if there is one child, or no children but a surviving parent or sibling; one-third if there are two or more children. That’s Probate Code § 6401(c).

Dying without a plan does not avoid probate. An intestate estate above the small-estate threshold still goes through full, court-supervised probate under the same statutory fee schedule that applies to any other estate.

Why does community property versus joint tenancy matter for taxes?

This is where the ownership label has the biggest dollar impact. When the first spouse dies, community property receives a step-up in basis to fair market value on both halves of the asset, not just the half the decedent owned. Joint tenancy only steps up the deceased spouse’s half; the surviving spouse keeps their original, often much lower, basis on their half. That distinction comes from Internal Revenue Code § 1014(b)(6).

In practice: if a married couple bought a home decades ago for a fraction of what it’s worth now, holding it as community property means the surviving spouse’s basis resets to full current value on the whole house when the first spouse dies. Holding the same house in joint tenancy resets only half of it. The surviving spouse who later sells can owe capital gains tax on the difference.

Can spouses change separate property into community property, or the reverse?

Yes. Spouses can agree in writing to change the character of an asset, from separate to community or community to separate. This is generally called transmutation. Because it changes what each spouse owns and what happens to the asset at death or divorce, it needs to be done in writing and worded correctly to hold up later. A handshake or a casual conversation does not change title or ownership character under California law.

Does a revocable living trust change any of this?

A trust does not change whether an asset is community or separate property. What it changes is how the asset passes at death. A will requires probate before it does anything; only a funded revocable living trust, meaning one where assets have actually been retitled into it, passes property to beneficiaries without going through probate court. Assets titled in joint tenancy, or accounts with a payable-on-death, transfer-on-death, or named beneficiary designation, also generally pass outside probate regardless of a trust.

A revocable living trust does not reduce income tax, property tax, or estate tax by itself. California has no state estate tax and no state inheritance tax, a fact that surprises a lot of people who assume otherwise. What a trust does is control who gets what, when, and under what conditions, and it keeps the process out of a public courtroom.

Figures verified July 2026.

What to do next

How you hold title, community property, joint tenancy, or separate property, determines both who inherits automatically and what your heirs pay in tax when they sell. If you’re not sure how your major assets are titled, or your estate plan hasn’t been updated since you bought a house or got married, that’s worth a conversation with an estate planning attorney. A living trust built around how your property is actually titled avoids surprises for the people you leave behind.