[WSBAPT] Community Property Agreement - Timing of Effectiveness

[J A Cyphers]

 IRC Section 1014(e) prohibits a step up in basis in regards to appreciated
property that was acquired by the decedent via a gift within one year of
their death.
If the assets are all community property, this would have no effect  But if
the effect of the community property agreement would be to convert separate
property to community property, then this statute prevents a step up in
basis .
So if husband has separate property, wife dies, and a community property
agreement converts husband's property to community property at wife's
death, the converted separate property does not get a step up in basis
because wife received it by the community property agreement - presumably a
gift - within one year of death.

On Mon, Jul 26, 2021 at 2:35 PM Kayleigh Lindemuth <kayleigh at nwlegacylaw.com>
wrote:

> Hello listmates,
>
>
>
> I’m wondering if anyone has any insight regarding when to make a community
> property agreement effective. I’ve always drafted them so that they’re
> effective immediately. I know others sometimes draft them so that they’re
> effective right before the first spouse’s death. Something in the back of
> my mind is saying there’s some downside to the latter approach, but I can’t
> recall exactly what it is and I’m not finding anything along those lines as
> I’m researching it. I believe the downside had something to do with the
> fact that making it effective right before someone’s death might not have
> been a long enough duration of time for it to be deemed legitimate. Any
> insight on this topic is greatly appreciated!
>
>
>
> *Kayleigh E. Lindemuth*
>
>  Attorney
>
>  nwlegacylaw.com | 360-975-7770
>
>
>
>
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-- 
Jackie Cyphers
Jeannette A. Cyphers, Attorney at Law
P. O. Box 908
Edmonds, WA 98020-0908
telephone 425-776-5887
fax 425-640-0814
jacyphers at gmail.com
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