California Is a Community Property State
In California, property acquired during marriage is presumed to be community property — owned 50/50 by each spouse. Separate property (owned before marriage, or received as a gift or inheritance during marriage) retains its separate character.
The Double Step-Up Advantage
Under federal tax law, community property receives a full step-up in basis on both halves when the first spouse dies. This is more favorable than the joint tenancy rule, which only steps up the deceased spouse's half.
Example: A community property home purchased for $400,000, worth $2,000,000 at the first spouse's death, gets a stepped-up basis of $2,000,000 for both halves — eliminating the entire $1,600,000 embedded gain. Under joint tenancy, only the deceased's $1,000,000 half steps up.
Community Property With Right of Survivorship
California allows married couples to hold property as community property with right of survivorship — combining the double step-up benefit of community property with the automatic transfer benefit of joint tenancy, while also potentially avoiding probate. This is often the preferred form of spousal ownership for California real estate.
Disclaimer: This glossary entry is for general educational purposes only and does not constitute legal or tax advice. Laws change frequently and vary by individual circumstances. Consult a licensed California attorney or CPA for guidance on your specific situation.