A Community Property Trust is a trust mechanism used in non–community-property states to allow spouses to “opt in” to community property treatment for assets they place into the trust. In jurisdictions that recognize these trusts, married couples can elect community property status to obtain potential tax advantages—most notably, a full step-up in basis at the first spouse’s death. Because Texas is already a community-property state, Texas spouses receive these benefits by default and therefore do not need a Community Property Trust to achieve community property treatment. The results of using a Community Property Trust are far from predictable as this is not a well established area of the law and many outstanding legal questions remain unanswered.
