Why Community Property Matters in Oregon

All couples moving into Oregon from a community property state should have a discussion with an knowledgeable estate planning attorney, preferably before they buy any property here. An experienced attorney can ensure compliance with Oregon’s Uniform Disposition of Community Property Rights at Death Act. You will likely want to preserve the community property status of your property, but if the community property can not be traced, or is commingled with separate property, then you can lose access to the benefits of community property.

Be diligent or you could end up paying extra income and/or capital gains taxes! There are two general ways that states deal with how married couples own property. Oregon is known as a common-law state where each spouse has separate property that must be probated or have another mechanism to pass the property along. Commonly spouses own property as tenants by the entirety or joint tenants with right of survivorship.

However, Oregon is surrounded by community property states like California, Washington, Nevada, and Idaho. If you are coming from one of these states, it can be a huge benefit to maintain that community property status. For income taxes, community property receives a full “step-up” in basis to the fair market value of the property at the time of the first spouse’s death. For example, that house you bought for $200,000 which is now worth $500,000 has a $300,000 taxable gain if you sold it now. It would have a 1/2 step up in basis for jointly owned property after the death of the first spouse so you would have a $150,000 taxable gain if you jointly owned it with your spouse and sold it after your spouse died. However, if the house was community property, there would be no taxable gain AT ALL if you sold it directly after your spouse died.  Rather large tax burdens can go away with careful planning.

This is very important for appreciated assets that have increased in value. However, you may not want to preserve community property status for depreciated assets because you will lose the benefit from the taxable loss.

Another possible reason to preserve community property status could be to more easily give one spouse’s 1/2 community property to children from a prior marriage instead of the spouse. This can be done with a trust or even a will. However, property owned as joint tenants with right of survivorship does not have this option.

So you have lived in Oregon your whole married life and think you are out of luck? While not recommended for everyone, there are community property trusts that CAN apply to property that was never considered community property through an Alaska or Tennessee community property trust. Careful consideration is needed before jumping into one of these trusts but common-law states can still potentially get the community property status through one of these thoughtfully constructed trusts.


Matthew Matrisciano is the Attorney Owner of MGM Law Firm LLC. (541) 233-7441 – 869 NW Wall St Ste 203C, Bend, OR 97701. Nothing in this post shall constitute legal advice and does not create an attorney-client relationship.

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