Effective July 1, 2026, married couples have a new estate planning option under the Kansas Community Property Trust Act (the “Act”). Enacted through House Bill 2590 during the 2026 legislative session, the Act allows married couples to voluntarily convert property into community property by transferring the property to a qualifying Kansas Community Property Trust.

Historically, Kansas has followed common-law property principles rather than community property principles. The Act does not convert Kansas into a traditional community property state. Instead, it allows married couples to affirmatively elect community property treatment for some or all of their property by establishing and funding a Kansas Community Property Trust.

One of the primary potential benefits of a Kansas Community Property Trust is favorable income tax treatment upon the death of the first spouse. Under federal tax law, qualifying community property may receive an adjustment in tax basis for both spouses’ interests at the first spouse’s death, commonly called (when the adjustment is upward) a double step-up in basis. For couples holding highly appreciated property, this may substantially reduce capital gains tax if the property is later sold. It may be particularly beneficial where the spouses anticipate that the surviving spouse will sell real estate, a closely held business, or another appreciated asset before distributing the sale proceeds to their children. Historically, such couples might have faced a choice between selling after the first spouse’s death, when the basis adjustment generally would apply only to the deceased spouse’s interest, or deferring the sale until after the surviving spouse’s death, when neither spouse would be available to manage the transaction. A Kansas Community Property Trust may provide an opportunity for the surviving spouse to complete the sale with substantially less taxable gain.

In addition to this potential tax benefit, the Act establishes rules governing the creation and administration of Kansas Community Property Trusts, the rights of each spouse in trust property, creditor claims, and the disposition of trust property upon death or divorce. While not the focus of this Article, it is worth noting that other sections of House Bill 2590 provide some other meaningful changes to Kansas trust law. First, it authorizes what is commonly known as “quiet trusts” in Kansas, a change that gives settlors of Kansas trusts the ability to keep information about the trust away from beneficiaries for a given timeframe. This may be useful where a settlor is concerned that premature disclosure of a substantial future inheritance could adversely affect a young beneficiary’s motivation, education, or financial development. Second, House Bill 2590 addresses a trustee’s discretionary authority to reimburse a settlor for income tax attributable to trust income or principal. Under Revenue Ruling 2004-64, a trustee’s purely discretionary reimbursement authority generally does not, standing alone, cause the trust assets to be included in the settlor’s gross estate. Estate-inclusion concerns may arise, however, if reimbursement is mandatory or if applicable state law causes trust assets to become available to the settlor’s creditors. The Kansas amendment is intended to provide greater certainty regarding creditor access and may enhance the flexibility of grantor-trust planning, including planning involving intentionally defective grantor trusts and spousal lifetime access trusts.

What Is A Kansas Community Property Trust?

A Kansas Community Property Trust is an express trust established by married spouses that satisfies the requirements of the Act. Under the Act, “community property” means property owned by a Kansas Community Property Trust during the marriage of the spouses.

The important distinction is that community property treatment is voluntary. The Act does not automatically change the character of property owned by married couples in Kansas. Instead, spouses may choose which property to transfer to a Kansas Community Property Trust. Once properly transferred, property owned by the trust is treated as community property during the marriage.

Property distributed out of the Kansas Community Property Trust generally ceases to constitute community property under the Act.

The Act is also not limited to property acquired after the marriage or after the Kansas Community Property Trust is created. Spouses may transfer existing property to the trust and thereby convert the property into community property. This can include property that was previously owned jointly as well as property previously owned separately by one spouse.

The Act also allows spouses to establish a Kansas Community Property Trust regardless of whether either spouse is domiciled in Kansas, provided the trust otherwise satisfies the requirements of the Act.

How Is A Kansas Community Property Trust Created?

Simply creating a trust is not enough to receive treatment under the Act. To qualify as a Kansas Community Property Trust, one or both spouses must transfer property to a trust that satisfies specific statutory requirements.

A qualifying Kansas Community Property Trust must:

  • Expressly declare that the trust is a Kansas Community Property Trust;
  • Have at least one “qualified trustee”;
  • Be signed by both spouses; and
  • Contain the disclaimer language required by the Act explaining the potential consequences of creating the trust and recommending that the spouses seek legal advice.

A “qualified trustee” is generally either an individual who is a Kansas resident or a company authorized to act as a fiduciary in Kansas. The qualified trustee must have certain powers, including the authority to maintain trust records and prepare, or arrange for the preparation of, income tax returns required to be filed by the trust.

Either spouse or both spouses may serve as trustee, provided the trust otherwise satisfies the qualified-trustee requirements.

The required disclaimer is important because transferring property to a Kansas Community Property Trust does more than potentially change the property’s tax treatment. Establishing the trust can significantly alter each spouse’s ownership rights in the transferred property and can affect what happens to the property upon death, divorce, or the assertion of creditor claims.

What Property Can Be Transferred To The Trust?

The Act broadly allows spouses to transfer any or all of their property to a Kansas Community Property Trust. This means that spouses are not required to place all of their assets into the trust.

Property that may be appropriate to place in a Kansas Community Property Trust includes:

  • Appreciated investment portfolios;
  • Farmland and other agricultural property;
  • Commercial or investment real estate;
  • Closely held business interests; and
  • Other assets with substantial unrealized appreciation.

This flexibility allows a Kansas Community Property Trust to be incorporated into an existing estate plan without necessarily replacing the couple’s entire estate planning structure.

Property should be evaluated on an asset-by-asset basis before being transferred. The potential tax benefits may be considerably greater for highly appreciated property than for property with little or no appreciation.

The transfer must also actually be completed. Merely identifying property in a trust agreement may not be sufficient to transfer title. Depending upon the type of asset, additional documents, such as deeds, assignments, or account registration forms, may be required to complete the transfer of the property to the Kansas Community Property Trust.

Some types of property may not be appropriate for a Kansas Community Property Trust. For example, 401(k)s, IRAs, and other income in respect of decedent (IRD) assets should not be transferred into a Kansas Community Property Trust.

How Is Property Managed While It Is In The Trust?

The Kansas Community Property Trust governs the spouses’ rights to manage and control property transferred to the trust. The Act provides spouses with flexibility to establish their respective rights and obligations regarding trust property, including how the property will be managed and how it will be disposed of upon death or dissolution of the marriage.

Once property is transferred to the Kansas Community Property Trust, management and control of the property are governed by the terms of the trust agreement rather than simply by which spouse originally owned the property. The trust agreement should therefore clearly address each spouse’s rights with respect to the property placed in the trust.

What Is The Potential Tax Benefit Of A Kansas Community Property Trust?

One of the primary reasons a married couple may consider a Kansas Community Property Trust is the potential for favorable income tax treatment of appreciated property when the first spouse dies.

Tax basis generally represents a taxpayer’s investment in an asset and is used to determine taxable gain or loss when the asset is sold. Under Internal Revenue Code § 1014, certain property acquired from a decedent generally receives a basis adjustment to its fair market value at the decedent’s death.

IRC § 1014(b)(6) provides special treatment for qualifying community property. In general, both the deceased spouse’s interest and the surviving spouse’s interest in qualifying community property may receive an adjustment in basis to fair market value at the first spouse’s death. This is commonly referred to as a “double step-up in basis.”

The Act is intended to allow property held in a Kansas Community Property Trust to receive the federal tax treatment available to qualifying community property under IRC § 1014(b)(6). Accordingly, for married couples with substantially appreciated assets, the potential basis adjustment may reduce the amount of taxable capital gain recognized if the surviving spouse later sells the property.

It is important to remember that this is a basis adjustment, not necessarily a basis increase. If property has declined in value, its basis may instead be adjusted downward to its fair market value. The tax consequences of transferring particular assets to a Kansas Community Property Trust should therefore be considered as part of the couple’s overall estate and tax planning.

Federal recognition of elective community-property regimes remains uncertain. In Commissioner v. Harmon, 323 U.S. 44 (1944), the U.S. Supreme Court declined to recognize Oklahoma’s elective community-property law for federal income-splitting purposes, reasoning that the optional arrangement was more analogous to a contractual assignment of income than to a traditional community-property system arising by operation of law. Harmon did not address the basis-adjustment rules now contained in IRC § 1014(b)(6), and arguments exist for distinguishing income allocation from the basis consequences of state-law property ownership. Nevertheless, the decision creates uncertainty because the Kansas Act, like the former Oklahoma law, permits spouses to elect community-property treatment. The Internal Revenue Manual (IRM 25.18.1) also cites Harmon in discussing elective community-property systems for federal income-reporting purposes. Although several states have enacted elective community-property trust statutes and no reported decision appears to have resolved the application of § 1014(b)(6) to those statutes, the absence of reported litigation should not be treated as confirmation that the IRS accepts the intended basis treatment.

Other Items To Consider

Although the potential tax treatment is an important feature of a Kansas Community Property Trust, transferring property to the trust can have other legal consequences that should be considered.

  • Death of a spouse. Upon the death of the first spouse, the trust property is generally divided equally between the surviving spouse’s share and the deceased spouse’s share.
  • Divorce. A Kansas Community Property Trust generally terminates upon dissolution of the marriage, with each spouse entitled to one-half of the trust property.
  • Creditor claims. An individual spouse’s obligations may generally be satisfied from that spouse’s one-half share of the trust, while joint obligations may be satisfied from the trust as a whole.

Conclusion

The Kansas Community Property Trust Act provides married couples with a new estate planning tool by allowing them to voluntarily convert selected assets into community property. For couples holding appreciated assets, a Kansas Community Property Trust may provide a significant tax benefit through the potential basis adjustment available at the death of the first spouse.

Whether a Kansas Community Property Trust is appropriate will depend on the couple’s particular assets and estate planning goals. Consideration should be given to the value and tax basis of the property, the effect of converting separately owned property into community property, and how the trust fits within the couple’s existing estate plan.

If you have any questions about Kansas Community Property Trusts or would like to discuss whether a Kansas Community Property Trust may be appropriate for your estate plan, please contact Russell Utter Jr. at BridgeBuilder Tax + Legal Services, P.A. for more information.

Co-authored by Russell E. Utter Jr. and Hailey Engle

Last updated 9/23/2026.