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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. <br></div><div>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 .</div><div>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.<br></div></div><br><div class="gmail_quote"><div dir="ltr" class="gmail_attr">On Mon, Jul 26, 2021 at 2:35 PM Kayleigh Lindemuth <<a href="mailto:kayleigh@nwlegacylaw.com">kayleigh@nwlegacylaw.com</a>> wrote:<br></div><blockquote class="gmail_quote" style="margin:0px 0px 0px 0.8ex;border-left:1px solid rgb(204,204,204);padding-left:1ex">
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<p class="MsoNormal">Hello listmates, <u></u><u></u></p>
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<p class="MsoNormal">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! <u></u><u></u></p>
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<p class="MsoNormal" style="line-height:150%"><b><span style="font-size:12pt;line-height:150%;font-family:"Georgia",serif;color:rgb(0,37,84)">Kayleigh E. Lindemuth<u></u><u></u></span></b></p>
<p class="MsoNormal" style="line-height:150%"><span style="font-size:12pt;line-height:150%;font-family:"Georgia",serif;color:rgb(0,37,84)"> Attorney<u></u><u></u></span></p>
<p class="MsoNormal" style="line-height:150%"><span style="font-size:12pt;line-height:150%;font-family:"Georgia",serif"> <a href="http://nwlegacylaw.com/" target="_blank"><span style="color:rgb(17,85,204)">nwlegacylaw.com</span></a> | 360-975-7770</span><b><span style="font-size:12pt;line-height:150%;font-family:Roboto;color:rgb(0,37,84)"><u></u><u></u></span></b></p>
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