When a client moved from California to Oregon, they thought the hardest part of relocation was behind them. But during a planning review with our Aldrich Wealth and Aldrich CPAs + Advisors team, a different kind of complication surfaced—one that had nothing to do with moving boxes. Their estate documents, drafted under California’s community property laws, no longer aligned with the rules of their new home state Oregon, a common law state. At our recommendation, they updated their estate plan to reflect Oregon’s legal framework, ensuring their intentions would still be carried out and tax opportunities wouldn’t be lost.
When crossing state lines there are major changes to consider so that neither you nor your loved ones face surprises down the road.
Different States, Different Systems
A move within the US might feel simple, but the laws that govern your assets don’t always travel with you. There are two predominant property law systems across states: common law and community property.
- In common law states like Oregon, each spouse owns their own separately titled property and half of anything titled jointly with a spouse.
- In community property states like California, assets acquired during marriage are owned equally with each spouse deemed to own half of property regardless of title.
The Advantages Depend on the Address
Both common law and community property have pros and cons, depending on the situation. A few main advantages and setbacks are listed below.
Community Property:
- Pro: Assets acquired during marriage are automatically considered jointly owned, providing clear rules for division in the event of divorce.
- Pro: All community assets receive a full step-up in basis upon the death of one spouse, offering a significant tax advantage in estate planning.
- Con: The adjustment of basis at passing could also mean a step down of everything if there’s a temporary down market.
Common Law:
- Pro: Assets are titled individually unless intentionally co-owned, allowing for greater flexibility in ownership.
- Pro: Because there could also be a step down at death, surviving spouse will preserve original higher basis in 50% of the asset.
- Con:At death, only the decedent’s share of assets receives a step-up in basis, which may result in higher capital gains taxes for the surviving spouse.
In any event, knowing which system you’re in is essential to understanding how your assets will be treated.
Estate Documents Don't Always Travel Well
A move across states can affect how your assets are treated even if you have estate documents drafted prior to the move. Picture this: After you move to Oregon, your spouse passes away. Since you won’t be traveling to California much anymore, you decide to sell your beach house, which was your vacation destination of choice. To your surprise, your CPA informs you that only half of the home’s basis gets a step up, meaning significant capital gains. That wasn’t the case when you created your estate plan in California…how could that be?
The fact is, preserving community property after a move to a common law state is complex, requiring not only strict segregation of accounts, but also additional estate documents in many cases. Commingling or using funds for new common law state purchases can undermine those efforts.
Whether you’ve recently moved or are just considering a relocation, it’s a good idea to revisit your financial and estate strategies.
Oregon vs. California: Key Estate and Tax Planning Considerations
Considerations | Common Law State – OR | Community Property State – CA |
Marital Property Regime | Common Law: each spouse owns property in their own name unless jointly titled. | Community Property: assets acquired during marriage are jointly owned 50/50 by default, regardless of title. |
Ownership of New Assets | Titled ownership determines actual ownership; new property purchased in Oregon is usually considered separate unless titled jointly. | All earnings and property acquired during marriage are presumptively community unless traceable to separate sources. |
Basis Step-Up at Death | Only the decedent’s portion (e.g., half of jointly held property and individually owned property) gets a step-up in basis. | Full step-up in basis for both spouses’ halves of community property upon the first spouse’s death — a major estate tax advantage. |
Impact of Moving from CA to OR | Potential loss of community property character and tax benefits if not proactively preserved. Assets may become separate, affecting title, step-up, and estate administration. | Community property protections and benefits are preserved while residing in California. Out-of-state assets can also be community property under CA law. |
Preserving Community Property After a Move to Oregon | Complex: may require a Community Property Trust, post-nuptial agreements, and strict segregation of accounts. Commingling or using funds for new Oregon purchases may undermine efforts. | No extra effort needed to maintain community property status while remaining a resident. |
Estate Document Validity Post-Move | California-based documents may conflict with Oregon law, leading to inconsistent titling, fiduciary appointments, or tax inefficiencies. Updating to match Oregon common law is essential. | Documents align with community property principles. Must ensure compliance with CA Probate Code and consider fiduciary law updates. |
Disclosure: This content is for informational purposes only and not investment advice.
