Living Trust for Married Couples in Texas: Community Property
Married couples in Texas can use one joint living trust or two separate trusts. Either way, the trust should keep track of which assets are community property and which are separate property, because that status controls who owns what at the first death and how the tax basis resets. Texas community property gets a full step-up in basis at the first spouse's death, which can save the survivor significant capital gains tax if the trust preserves that character.
Community vs separate property
In Texas, property either spouse acquires during marriage is presumed to be community property, except gifts, inheritances, and what each owned before the marriage, which stay separate. Income from separate property is community unless an agreement says otherwise. Mixing the two, such as depositing an inheritance into a joint account, can blur the line, and the spouse claiming separate property must prove it by clear and convincing evidence.
Joint trust or two separate trusts
| Joint trust | Separate trusts | |
|---|---|---|
| Paperwork | One document and one set of titles | Two documents, each owning its own assets |
| Community property | Easy to hold together | Needs a clear agreement on who holds what |
| Separate property | Must be tracked and kept identifiable | Each spouse keeps their own in their own trust |
| Blended families | Can be rigid after the first death | Each spouse can direct their own share |
Most couples with a first marriage and shared children use a joint trust. Couples with children from prior relationships or significant separate property often use separate trusts.
The double step-up in basis
When an owner dies, the tax basis of the property they owned generally resets to its fair market value at death. For Texas community property, federal law gives the survivor a reset on both halves, not just the decedent's half. That matters when a couple holds appreciated real estate or stock. If the trust converts community property into separate property, the survivor can lose that second step-up, so the trust should state that community property keeps its character.
What happens at the first death
A common design splits the trust at the first death or leaves everything to the survivor outright inside the trust. The survivor may keep full control, or part of the trust may be locked for the children. The right setup depends on whether this is a first marriage, how much each spouse owns, and whether either spouse wants to guarantee that children from an earlier relationship inherit.
Keep the agreement in writing
If spouses want to change the character of property, such as converting separate to community or the reverse, Texas requires a written, signed partition or exchange agreement. Your attorney can add that to the plan so the trust matches what you actually own. See also our guide on community property at death.
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Book Free ConsultationFrequently asked questions
Can spouses each have their own trust?
Yes. Each can fund their own trust with their separate property and half of the community property, with a written agreement that identifies which is which.
Does a joint trust avoid probate at both deaths?
Assets titled in the trust avoid probate at both deaths, as long as they were retitled into the trust.
Is a trust needed to get the double step-up?
No. The step-up is a tax rule for community property owned at death. A trust only needs to avoid breaking the community character of the assets.
What if one spouse owns a business before marriage?
That stays separate property, though its growth or income may have community components. A trust can hold it separately to keep the record clean.