Kansas Community Property Trusts: What Married Couples Should Know
Oct 14, 2026 · by: Polly Bartle Blomquist
For decades, married couples in California and Texas and a few other states have had a quiet tax advantage over couples in Kansas and Missouri. As of July 1, 2026, Kansas law gives you a way to claim much of that same advantage without moving anywhere. It’s called a Kansas Community Property Trust, and for the right family, it can save a great deal in capital gains tax.
What it is, in plain English
A community property trust is a joint trust that a husband and wife sign together. By putting assets into it, you agree to treat everything inside as owned 50/50 by the two of you, no matter whose name it was in or who earned it. Kansas passed the law this year (House Bill 2590), joining a handful of states such as Tennessee, Florida and Kentucky that offer the same option.
Why it matters: the “double step-up”
First, two quick terms. Your basis is generally what you paid for something, plus what you’ve put into it (a new roof, a major remodel, a barn, etc.), minus any depreciation you’ve claimed. When you sell it, you pay capital gains tax on the difference between your basis and the sale price. Buy land for $500,000, sell it for $3 million, and you have a $2.5 million gain to pay tax on.
There’s a helpful rule at death. When someone dies, the property they leave gets a new basis equal to its value on the date of death. That’s the step-up, and it means the growth during their lifetime is never taxed.
Here’s the catch for married couples in Kansas and Missouri. When you own property jointly and one spouse dies, only the deceased spouse’s half gets stepped up. The survivor’s half keeps its old basis. Community property works differently: both halves step up at the first death. That’s why people call it a “double” step-up.
Here’s how it plays out. You and your spouse bought farmland in 1995 for $500,000. Today it’s worth $3 million. One of you passes away, and the survivor sells the land for $3 million.
| Owned jointly | In a community property trust | |
|---|---|---|
| Deceased spouse’s half | Steps up to $1,500,000 | Steps up to $1,500,000 |
| Surviving spouse’s half | Stays at $250,000 | Steps up to $1,500,000 |
| Survivor’s total basis | $1,750,000 | $3,000,000 |
| Sale price | $3,000,000 | $3,000,000 |
| Taxable gain (sale price minus basis) | $1,250,000 | $0 |
Same land, same sale price. The only difference is how it was owned. On a $1.25 million gain, federal capital gains tax alone could easily top $200,000, before any state tax. The same idea applies to rental property, a family business, or stock that has grown over the years.
Who should take a look
This tool fits best for married couples who own assets that have grown significantly in value: farmland, rental real estate, a family business, or long-held investments. It is not about avoiding estate tax. It is about what your surviving spouse, and eventually your children, pay when they sell.
A word to our Missouri clients: you don’t have to live in Kansas to use this trust. The law expressly allows spouses who live elsewhere to create one, as long as at least one trustee is a Kansas resident or a trust company authorized in Kansas. That said, the tax picture for out-of-state couples is less tested, so we’ll look closely at whether it makes sense for you.
What to weigh before you sign
This is a powerful tool, but it isn’t right for every couple. A few things we’ll talk through with you:
- It’s a true 50/50 commitment. If you divorce, the trust ends and each spouse takes half, regardless of who brought the asset into the marriage.
- It’s hard to undo. Neither spouse can change or revoke it alone unless the trust allows it.
- Creditor protection can change. Property held as tenants by the entirety loses some of that protection once it moves into the trust.
- Not every asset belongs in it. Retirement accounts like IRAs and 401(k)s don’t get a step-up, so they generally stay out.
- It’s new. The IRS has not challenged similar trusts in other states, but no court or IRS ruling has addressed Kansas’s version yet.
Let’s talk about whether it fits
The best planning starts with your goals, not a form. If you own appreciated property and want to know whether a Kansas Community Property Trust could help your family, give us a call. We’ll walk through it with you, the benefits, trade-offs, and how it fits with the plan you already have.
This article is general information, not legal or tax advice for your situation.
