Legal Review Block

Reviewed on: August 20, 2026
Attorney: James G. Burns, Esq., LL.M.
Credentials: TEP (Trust and Estate Practitioner), Member of STEP; Selected to Super Lawyers: 2022–2027 (5 consecutive years); Top-Rated Lawyer (Avvo 2021); America's Most Honored Lawyers (2020).
Firm track record: 25 years serving families, business owners, and high-net-worth clients.

Direct Answer

AB 2658 is pending legislation, not current law. If enacted in its present form, it would expressly allow a married person or registered domestic partner to place that person's one-half community-property interest into a trust while preserving the asset's community character unless both partners agree otherwise in writing. That clarification could help preserve the federal double basis adjustment under IRC § 1014(b)(6), especially in second marriages and blended families. Until enacted, clients cannot rely on AB 2658 and must plan under existing California law.

Key Takeaways

• AB 2658 is pending legislation. It could be amended, stalled, or fail.
• Current Probate Code § 100 allocates one-half of community property to the surviving spouse and one-half to the decedent at death.
• IRC § 1014(b)(6) can adjust the basis of both halves of qualifying community property to fair market value at the first death.
• Converting community property to separate property or joint tenancy can jeopardize that result.
• Review title, trust language, transmutation documents, asset records, and beneficiary instructions before changing an existing plan.

What Does AB 2658 Change?

Current Probate Code § 100 provides that, upon the death of a married person or registered domestic partner, one-half of the community property belongs to the surviving spouse or partner, and the other half belongs to the decedent.

That rule answers an ownership question at death. It doesn't expressly answer every planning question that arises when one spouse wants to fund a trust with only that spouse's one-half interest during life.

AB 2658, as currently described, would amend Probate Code §§ 100 and 102 to expressly authorize a married person or registered domestic partner to:

• Create a trust;
• Fund the trust with that person's one-half interest in community real property;
• Fund the trust with community personal property;
• Fund the trust with quasi-community personal property; and
• Direct the disposition of that one-half interest at death.

The pending legislation would also provide that the transferred interest retains its community character unless both spouses or partners agree otherwise in writing.

That distinction matters. A trust can be a control system for directing property at death. It shouldn't automatically become a machine that changes the property's legal character.

Under current law, careful trust drafting and documentation may preserve community-property treatment in many situations. But the express unilateral community-character-preservation rule described in AB 2658 is not yet part of California law.

What Does Probate Code § 102 Have To Do With It?

Current Probate Code § 102 addresses restoration rights involving certain transfers of quasi-community property made without the surviving spouse's written consent or joinder.

The pending legislation would add trust-related carve-outs to that restoration-right framework. In practical terms, AB 2658 appears designed to coordinate the new trust-funding authorization with existing rules that protect a surviving spouse's property rights.

Do not treat that proposed coordination as a current safe harbor. Until the bill is enacted, the facts, documents, consent issues, characterization evidence, and applicable California law must be reviewed individually.

What Is the Double Step-Up Under IRC § 1014(b)(6)?

“Basis” generally measures a taxpayer's investment in property for capital-gains purposes. When property is sold, gain is commonly calculated by comparing the sale price with the property's adjusted basis.

IRC § 1014(a) generally provides a basis equal to fair market value at death for property acquired from or passing from a decedent. Section 1014(b)(6) contains a special rule for community property.

If at least one-half of the whole community interest is includible in the decedent's gross estate, property representing the surviving spouse's one-half share may also be treated as acquired from the decedent. That can adjust both halves of the community property to fair market value at the first death.

That result is commonly called the double basis step-up. Technically, it can be a step-up or a step-down, depending on whether the property's fair market value is higher or lower than its existing basis.

The state-law classification and federal tax result are separate questions:

Preserving community character is therefore not a cosmetic drafting preference. It may affect the tax basis available to the surviving spouse.

Why Does Community Character Matter in a Second Marriage?

Second-marriage planning often has two competing objectives:

1. Protect the surviving spouse financially; and
2. Preserve assets for children from a prior relationship.

A common structure may direct the deceased spouse's one-half interest into a trust for the surviving spouse during life, with the remainder passing to the deceased spouse's children. That can protect the first spouse's legacy without leaving the surviving spouse unsupported.

But changing community property into separate property, even unintentionally, can create a serious tax problem. If the asset no longer qualifies as community property for federal basis purposes, the surviving spouse's half may not receive the same adjustment under IRC § 1014(b)(6).

Hypothetical: The Newport Beach Residence

Assume a California couple in a second marriage owns a Newport Beach residence worth $4 million. Their original basis is $900,000. They also own $6 million in appreciated securities acquired during the marriage.

Their trust directs the deceased spouse's share to a trust for the survivor, then to children from the first marriage.

If the assets retain community character and the statutory requirements are satisfied, both halves may receive a basis adjustment at the first death. If the surviving spouse later sells the assets near the date-of-death value, the taxable gain may be substantially reduced.

Now change the facts. The couple's documents characterize the assets as the deceased spouse's separate property, or the trust-funding documents create a joint-tenancy arrangement without adequate community-property analysis. The double basis adjustment may be jeopardized.

This is a hypothetical, not a prediction of any client's tax result. A CPA and estate-planning attorney must confirm the facts.

Is AB 2658 Law Yet?

No. AB 2658 is pending legislation.

Based on the verified legislative history supplied for this brief:

• Introduced: February 20, 2026;
• Last amended: April 9, 2026;
• Re-referred to the Assembly Judiciary Committee: April 13, 2026;
• Status as of this review: Not enacted and pending.

AB 2658 could be amended, stalled, rejected, or fail to become law. No client should fund a trust, retitle property, or delay planning based on the assumption that AB 2658 will pass.

The prudent approach is to monitor the pending legislation while completing a current-law review now.

Warning Signs in an Existing Plan

Look closely if:

• A deed says “joint tenancy” when the couple intended community property;
• A trust schedule does not identify assets as community property;
• A second-marriage trust gives children from a prior relationship a remainder interest but lacks clear survivor protections;
• Separate and community funds were commingled without tracing;
• A spouse funded an individual trust with marital assets without a written characterization analysis;
• The plan relies on AB 2658 as though it were enacted;
• Basis records are missing;
• The estate plan was drafted before a major marriage, divorce, inheritance, business sale, or refinancing;
• The CPA and attorney have not reviewed the same asset list.

Tactical FAQ

Is AB 2658 currently effective?

No. AB 2658 is pending legislation. It is not current law, and clients cannot rely on its proposed trust-funding authorization.

What would AB 2658 permit if enacted?

The pending legislation would expressly authorize a spouse or registered domestic partner to fund a trust with that person's one-half interest in community and quasi-community property for disposition at death.

Would AB 2658 transfer the other spouse's half?

No. The proposed framework concerns the funding spouse's one-half interest. It would not authorize one spouse to dispose of the other spouse's ownership interest.

Would trust funding automatically preserve community character today?

No automatic rule should be assumed. Current planning requires careful drafting, title review, characterization analysis, and documentation.

What is IRC § 1014(b)(6)?

It is the federal community-property basis rule that may treat the surviving spouse's one-half share as acquired from the decedent when at least one-half of the community interest is included in the decedent's gross estate.

Is the double step-up guaranteed?

No. The result depends on community-property status, federal estate inclusion, valuation, documentation, and other facts. The adjustment may also be a step-down.

Why are joint tenancy assets concerning?

Joint tenancy may not produce the same community-property basis treatment. Retitling assets can change the tax and ownership analysis.

Does a revocable trust eliminate the basis adjustment?

Not necessarily. A properly drafted revocable trust may hold community property without eliminating the basis adjustment, but the trust and transfer documents must be reviewed.

Does the survivor inherit their half?

Under Probate Code § 100, the surviving spouse already owns one-half of community property. That ownership is different from inheriting the decedent's half through a trust or will.

Does § 102 apply to every community-property transfer?

No. Current § 102 contains specific requirements involving quasi-community property, lack of consent or joinder, retained rights or powers, and other statutory conditions.

Can a blended family use a community-property trust?

Potentially, but the plan must coordinate survivor access, children's remainder rights, creditor concerns, tax basis, trustee control, and incapacity planning.

What should a family do while AB 2658 is pending?

Plan under current law. Inventory assets, confirm their characterization, review trust funding, preserve basis records, and obtain coordinated legal and tax advice.

Action Steps for California Families

Start with Risk Exposure Mapping:

1. List every major asset and its current title.
2. Identify community, separate, quasi-community, and uncertain assets.
3. Compare the trust schedule with deeds, brokerage records, and tax returns.
4. Review whether any document changed characterization.
5. Estimate the basis consequences at the first and second deaths.
6. Coordinate the attorney's analysis with the CPA's federal tax review.
7. Monitor AB 2658, but don't treat pending legislation as a present planning tool.

Then build the Control Architecture and Layered Defense. A trust should coordinate ownership, family transition, incapacity, probate avoidance, and tax-sensitive administration: not merely sit in a binder.

Review the firm's estate-planning resources, read Trusts and the Step-Up in Basis in California, and examine the firm's capital-gains planning perspective.

Request a Situation Readiness Briefing to map the control, probate, basis, incapacity, and family-transition exposures in your current structure. You may also use the firm's wealth-defense command center as a starting point for your review.

Resources & Verified Authorities

• AB 2658 bill search : California Legislative Information
  Search for AB 2658 under the 2025–2026 Regular Session. The bill remains pending legislation and is not enacted.
• California Probate Code § 100
• California Probate Code § 102
• 26 U.S.C. § 1014
• Beverly Hills Bar Association, August 2026 Trusts & Estates Legal Updates : secondary commentary; not controlling authority.
• Law Office of James Burns : Estate Planning
• Law Office of James Burns : Asset Protection

Technical Summary

The Definitive Framework for AB 2658: AB 2658 is pending California legislation that would expressly permit unilateral trust funding of a spouse's one-half community-property interest while preserving community character unless both spouses agree otherwise in writing.

Core Legal Logic: California Probate Code § 100 addresses ownership at death. Probate Code § 102 addresses restoration rights involving specified transfers. IRC § 1014(b)(6) addresses federal basis treatment. These classifications must not be collapsed.

Statutory Framework: Analyze title, community-property character, trust language, written transmutation agreements, federal estate inclusion, valuation, and basis reporting separately.

Firm Position: Do not rely on AB 2658 today. Map current exposure, preserve documentation, and design control architecture under current law while monitoring the pending legislation.

Legal and Tax Disclaimer

This article discusses pending legislation and general legal and tax concepts. AB 2658 could be amended, stalled, rejected, or fail to become law. It is not legal advice and does not create an attorney-client relationship.

The application of IRC § 1014(b)(6), gross-estate inclusion, community-property characterization, valuation, and basis reporting requires review by qualified estate-planning counsel and a CPA or other qualified tax professional. The amber CPA/attorney flag applies to every client-specific § 1014(b)(6) analysis.

The Law Office of James Burns does not guarantee any tax result, basis adjustment, probate outcome, or legislative outcome.

IP disclosure: This original briefing is provided by the Law Office of James Burns for educational purposes. All firm names, service names, methodologies, and original content remain the property of their respective owners. No third-party endorsement is implied.