For couples living in a community property state, a brokerage account can offer unique tax benefits—especially when it comes to estate planning and investment flexibility. Two of the biggest advantages are the step-up in basis and the freedom to liquidate investments on your own terms.
1. Step-Up in Basis at the First Spouse’s Passing
In a community property state, when one spouse passes away, both halves of the jointly owned assets typically receive a step-up in basis to the fair market value as of the date of death. This is different from many other states where only the deceased spouse’s half gets the step-up.
- Why it matters: If the surviving spouse sells the investments shortly after, they may avoid paying capital gains taxes on appreciation that happened during the couple’s lifetime.
2. Flexibility in Liquidating Investments
Unlike retirement accounts, brokerage accounts don’t have required distributions. This gives couples the freedom to sell investments when it makes the most sense for their tax situation, income needs, or market conditions—rather than being forced to take taxable withdrawals.
3. Planning Opportunities
This combination of tax efficiency and flexibility makes brokerage accounts a powerful tool for retirement planning, wealth transfer, and long-term tax strategies. If you live in a community property state, it’s worth reviewing how your assets are titled and whether you’re set up to take advantage of these rules.
Take advantage of community property benefits before it’s too late.
If you live in a community property state, how you title and manage your brokerage accounts can make a significant difference in your tax liability, estate plan, and long-term wealth strategy. Don’t leave these opportunities on the table.
👉 Schedule a review with wealthnest® today to make sure your accounts are structured to maximize tax efficiency and protect your legacy.