Quick answer: Texas is a community property state — most assets acquired during marriage are owned 50/50 by both spouses regardless of whose name is on the title. The major estate planning benefit: at the first spouse's death, both halves of community property receive a full stepped-up basis to current fair market value — potentially eliminating a lifetime's worth of capital gains for the surviving spouse who then sells.
Community Property vs. Separate Property
Texas distinguishes between two types of property in a marriage:
- Community property: Income earned during marriage, assets purchased with that income, and anything acquired during marriage that isn't a gift or inheritance. Both spouses own this 50/50.
- Separate property: Assets owned before marriage, inherited assets, and gifts received during marriage. This remains the individual spouse's property — but commingling it with community property can cause it to lose its separate character.
Texas follows the "inception of title" rule — the character of property is generally determined when it's acquired. A ranch purchased before marriage stays separate property; ranch land purchased with marital income is community property.
The Double Step-Up: A Significant Tax Advantage
In common-law property states (like most of the country), only the deceased spouse's half of jointly owned property gets a stepped-up basis at death. In Texas, community property gets a full basis step-up on both halves at the first death. On a ranch worth $2 million with an original cost of $200,000, a Texas surviving spouse gets a $2 million basis — meaning they can sell immediately with zero capital gains. In a common-law state, only $1 million (the deceased's half) would be stepped up.
Planning Considerations in Texas
Married couples moving to Texas from a common-law state should review how previously acquired assets are characterized. Texas law allows couples to enter into partition and exchange agreements to convert community property to separate property (or vice versa) — useful for estate planning flexibility. Always maintain clear records of separate property and avoid commingling funds in shared accounts without documentation. Work with a Texas family law attorney and estate planner to structure assets for maximum benefit.
Questions About Protecting Your Wealth?
Kyle Ellison is a licensed financial professional in TX, CA, NV, MT, UT, NM helping families protect and pass on what they've built.