The step-up in basis hiding in your Spanish marriage contract

There is a moment in every purchase on the Costa del Sol when the notary looks up from the deed and asks a question that sounds procedural. Under what regime are you married? The American answer is usually a shrug, or "Ohio", or "we just own things together". Somebody writes something down. The deed is signed, the keys change hands, and nobody in the room has said the words capital gains.

This page is for married American couples relocating to Spain on the non-lucrative visa with meaningful appreciated assets. It is a companion to our general guide to your matrimonial property regime when relocating to Spain, which explains what a regime is and how Spain's default works. That page answers the civil-law question correctly and completely. This page is about the second question, the one that is almost never asked: what your regime does to your basis.

We are going to make an argument here rather than recite a rule, and we will show you the exact texts, including the text that cuts against us. There is no IRS ruling we have found that squarely addresses Spain's sociedad de gananciales, and we are not going to invent one. What we can do is put eleven words of the Internal Revenue Code next to four articles of the Spanish Civil Code and let you see the shape of the thing.

First, the surprise: the law of your marriage is not Spanish

Start by removing the assumption underneath everything else. American couples arriving in Málaga tend to believe that once they are resident, Spanish family law governs them — that they have somehow become subject to gananciales by living here. They have not, and the mechanism that prevents it is worth seeing, because the same mechanism is what later lets them choose it deliberately.

Two regimes of private international law are in play, and which one applies to you depends on a date. For spouses who married before 29 January 2019, Spanish courts look to article 9.2 of the Civil Code, which fixes the law governing the effects of the marriage at the moment of the wedding: "Los efectos del matrimonio se regirán por la ley personal común de los cónyuges al tiempo de contraerlo" — and, failing that, by the law of the first common habitual residence immediately after the celebration. Note the tense. It is decided once, at the beginning, and living somewhere else for thirty years does not move it.

For spouses who married on or after that date, Regulation (EU) 2016/1103 applies, and its article 26(1)(a) reaches almost the same place by a different road: absent a choice, the applicable law is that of "the spouses' first common habitual residence after the conclusion of the marriage". Again: first. Not current.

So a couple married in Cleveland in 1985, who lived in Ohio for their first years of marriage and moved to Marbella in 2026, are governed by Ohio law — a separate-property system — and they will remain governed by Ohio law until they do something about it. Two further articles of the Regulation make this concrete in a way that surprises people. Article 20 provides that "The law designated as applicable by this Regulation shall be applied whether or not it is the law of a Member State": a Spanish judge or notary is expected to apply Ohio law, not to shrug and reach for the Civil Code. And article 21 provides that the applicable law "shall apply to all assets falling under that regime, regardless of where the assets are located". One law, one marriage, every asset — the villa in Nueva Andalucía and the brokerage account in Cleveland, together.

The eleven words: "or any foreign country"

Now the American half. Section 1014 of the Internal Revenue Code is the provision every US adviser knows as the step-up in basis: property acquired from a decedent takes a new basis equal to fair market value at death. Its subsection (b) lists the kinds of property that count as acquired from the decedent, and paragraph (6) is the one written for community property states. Here it is in full, as it stands today:

Read the geography again. Any State. Any possession of the United States. Or any foreign country. This is not a drafting accident or a fossil nobody has looked at. In 1976, Congress went into this very sentence and edited the list — Public Law 94-455 struck out the word "Territory," where it appeared after "any State". Congress had the list open, removed something from it, and left "any foreign country" standing. Whatever else is uncertain here, the statute's reach beyond the United States is not.

Two things follow that matter more than they look. First, the condition is that at least half of the community interest was includible in the decedent's gross estate — not taxed, not even reported. For a US citizen, the gross estate under chapter 11 is worldwide, so a Spanish community asset is includible as a matter of course. Includible is a much lower bar than taxable, and it is the bar the statute actually sets. In 2026 the basic exclusion amount is $15,000,000 per person after the amendment to §2010(c)(3), so the overwhelming majority of our clients will owe no US estate tax at all — and will still satisfy §1014(b)(6), because the test was never about paying.

Second, the characterisation question is referred outward. The IRS position in this area, expressed in Revenue Ruling 87-98, runs along the line that because property is community property under the relevant property law, it is community property within the meaning of section 1014(b)(6). The Code does not define community property for itself. It looks to the law that governs the marriage — and, by its own terms, it is willing to look at the law of a foreign country to find it.

What Americans actually lose: the joint account and the half step-up

To see why any of this is worth a notary appointment, you have to be precise about what the double step-up is being compared to, because this is where most explanations go wrong.

If a husband owns an appreciated portfolio outright, in his name alone, and dies, the whole portfolio is in his estate and the whole portfolio steps up. Community property adds nothing. The comparison that matters is not that one. It is the one almost every American couple is actually in: the account titled John and Mary Smith, joint tenants with right of survivorship. The house held jointly. The brokerage account opened in 1994 and never re-papered since.

On the first death, only the decedent's half of jointly held property is includible in the estate, so only that half steps up. The survivor's half is not acquired from the decedent — it was always theirs — and it keeps its original, ancient basis. The couple gets half a step-up. Community property under §1014(b)(6) is the exception that gives both halves.

Put numbers on it. A joint brokerage account worth $5,000,000 with a cost basis of $1,000,000. Under joint tenancy, the decedent's half steps to $2,500,000 and the survivor's half stays at $500,000: new basis $3,000,000, and $2,000,000 of gain still latent in the account. As community property, the whole account steps to $5,000,000 and the latent gain is zero. That is a $2,000,000 difference in taxable gain created by nothing but the label on the ownership.

What gananciales actually is, in the Code's own words

So the question becomes whether Spain's default regime is community property in the sense the American statute means. Here is the Spanish Civil Code, unglossed.

Article 1316 sets the default: "A falta de capitulaciones o cuando éstas sean ineficaces, el régimen será el de la sociedad de gananciales." Absent an agreement, gananciales. Article 1344 defines it: "Mediante la sociedad de gananciales se hacen comunes para los cónyuges las ganancias o beneficios obtenidos indistintamente por cualquiera de ellos, que les serán atribuidos por mitad al disolverse aquella." Gains obtained by either spouse become common, and are attributed by halves on dissolution. Article 1361 supplies the presumption: "Se presumen gananciales los bienes existentes en el matrimonio mientras no se pruebe que pertenecen privativamente a uno de los dos cónyuges." And article 1404 completes the arithmetic at the end: the remainder "se dividirá por mitad entre los cónyuges o sus respectivos herederos."

Common ownership of marital gains, a presumption of community, and division by halves between the spouses or their heirs. If you set that beside Texas or California and squint, you are looking at the same animal. The resemblance is not a coincidence: the Spanish and the American community property systems share an ancestor, which is why eight US states have this and forty-two do not.

The honest objection: a community with no halves in it

Now the part that a page trying to sell you something would leave out.

Spanish doctrine and the case law of the Tribunal Supremo do not describe the sociedad de gananciales as a co-ownership in undivided shares. They describe it as a comunidad germánica — a community "in hand", of Germanic type — in which the spouses' right affects the object indeterminately, without attribution of shares, and neither spouse may demand material division while the community subsists. During the marriage, on this analysis, neither spouse owns a half of anything. There is no aliquot 50% of the Marbella flat sitting in the wife's patrimony. There is a community, and there are two members of it.

That is a real problem for §1014(b)(6), which speaks of "the surviving spouse's one-half share of community property". If there is no one-half share, there is nothing for the statute to grab. Anyone who tells you this objection does not exist has not read the Spanish authorities.

Here is the answer, and you should weigh it yourself. The statute does not ask what the surviving spouse owned during the marriage. It asks what happens at a single instant: the death. And that instant is precisely when Spanish law supplies the halves. Article 1392 provides that the community "concluirá de pleno derecho: 1.º Cuando se disuelva el matrimonio" — dissolved by operation of law, automatically, at the moment the marriage ends, which is to say at the moment of death. Article 1344 says the gains are attributed por mitad exactly then, "al disolverse aquella". Article 1404 divides the remainder by halves between the spouses or their heirs. The one-half share the American statute is looking for comes into existence at the same instant the statute starts looking for it.

How a couple married in 1985 gets there at all

Suppose you find the argument persuasive. Our Cleveland couple are governed by Ohio law, and Ohio is not a community property state. How do they get to gananciales?

Through the door the Civil Code has always left open. Article 1315: "El régimen económico del matrimonio será el que los cónyuges estipulen en capitulaciones matrimoniales." Article 1325 lets the parties "estipular, modificar o sustituir" their regime. Article 1326 is the one that matters for people who have been married for forty years: "Las capitulaciones matrimoniales podrán otorgarse antes o después de celebrado el matrimonio." Before or after. There is no deadline and no age limit. Article 1327 sets the form — "Para su validez, las capitulaciones habrán de constar en escritura pública" — which is to say a notary, the same notary who asked the question over the deed. Article 1333 handles the paperwork afterwards: the capitulaciones are noted against the marriage entry in the Registro Civil, and where they affect immovables, recorded at the Registro de la Propiedad.

But which law lets a couple governed by Ohio law choose Spanish law at all? Two routes, depending again on the date of the wedding — and this is the elegant part.

For our pre-2019 couple, article 9.3 of the Civil Code: agreements stipulating, modifying or substituting the matrimonial regime are valid when they conform "bien a la ley que rija los efectos del matrimonio, bien a la ley de la nacionalidad o de la residencia habitual de cualquiera de las partes al tiempo del otorgamiento". The habitual residence of either party at the time of granting. They live in Málaga now. Spanish law is available to them.

And then Regulation 2016/1103 does something that reads like a drafting oversight and is in fact the whole design. Its transitional provision, article 69(3), says: "Chapter III shall apply only to spouses who marry or who specify the law applicable to the matrimonial property regime after 29 January 2019." Chapter III is the applicable-law chapter. Our 1985 couple are outside it — until the day they specify the applicable law, which brings them inside it. And once inside, article 22(1)(a) is waiting: the spouses may designate "the law of the State where the spouses or future spouses, or one of them, is habitually resident at the time the agreement is concluded". Spain. The couple walks into the Regulation through the same act by which they use it.

The trap in article 22(2): prospective effect only

Here is where an unadvised couple signs the wrong deed and gets almost none of what they came for.

Article 22(2) of the Regulation: "Unless the spouses agree otherwise, a change of the law applicable to the matrimonial property regime made during the marriage shall have prospective effect only." The default is that your existing portfolio, the one with $4,000,000 of gain in it, does not become community property. Only what you acquire afterwards does. A couple who signs a standard, unconsidered set of capitulaciones adopting gananciales has converted their future — and their future is the part with no gain in it yet.

The words that matter are the first three. Unless the spouses agree otherwise. Retroactivity is available, and it has to be reached for deliberately and drafted. It is not free of consequence: article 22(3) provides that any retroactive change "shall not adversely affect the rights of third parties deriving from that law", which is a creditor-protection rule and a real constraint if there is debt, a business, or litigation anywhere in the picture. But the difference between a deed that reaches backwards and one that does not is, on the numbers in the example above, the entire point of the exercise.

The silent conversion: article 1347.2º and your dividends

There is a provision here that almost nobody mentions to American clients, and it operates whether or not anyone intended it.

Article 1347 lists what is ganancial. Paragraph 1º is income from work. Paragraph 3º is what you buy with common funds. And paragraph 2º is this: "Los frutos, rentas o intereses que produzcan tanto los bienes privativos como los gananciales." The fruits, rents and interest produced by privative assets as well as community ones.

Read that against a retired American couple's balance sheet. The Cleveland portfolio itself, brought into the marriage or inherited, is privative under article 1346 and stays privative. But every dividend it pays, every coupon, every euro of rent from the Estepona apartment, is ganancial the moment it is produced. The corpus stays separate; the yield goes into the community, continuously and silently, from the first day Spanish law governs the regime.

Which cuts both ways, and we would rather you heard both. It means a couple who adopt gananciales prospectively are not getting "nothing until they buy something" — their income stream is being communitised in real time, and the assets bought out of that stream are community assets with a clean start. It also means that a couple who wander into Spanish law without advice have begun mixing two patrimonies that their American estate plan, their US living trust and their existing will all assume are separate. Untangling that later is expensive, and it is the kind of thing discovered by an executor rather than by the person who caused it.

The Andalusian complication: Spain may point the other way

Now the tension that makes this a conversation rather than a recommendation, and the reason we will not tell you the answer on a web page.

Everything above is about the American side. On the Spanish side, the incentives may run in the opposite direction. Spanish income tax gives an inherited asset a new acquisition value: under article 36 LIRPF the acquisition value on a lucrative transfer is the one resulting from the inheritance tax rules, capped at market value, and under article 33.3.b) LIRPF there is no gain or loss on the death itself — the plusvalía del muerto is not taxed. Spain, in other words, has its own step-up, and it attaches to what is inherited.

Under gananciales, the surviving spouse's half is not inherited. It is theirs already, released to them by the liquidation of the community. It attracts no Spanish inheritance tax — and it gets no new Spanish acquisition value either. Under a separation regime with the asset titled to the first spouse to die, the widow inherits the whole thing: she pays inheritance tax on all of it, and she gets a fresh Spanish acquisition value on all of it.

Normally that trade is obviously bad. In Andalucía it may not be, because the inheritance tax cost of the second column is close to zero for a spouse — which is precisely what makes the trade worth modelling here rather than assuming. Our page on inheritance tax in Spain for expats and our wealth tax page set out the regional position; the wealth tax point runs the other way again, since attributing assets 50/50 gives a couple two sets of per-taxpayer exemptions and thresholds instead of one.

There is a second Spanish structure that lands on the same §1014 question from the opposite direction, and families often meet both in the same conversation: gifting the bare ownership of a property to the children while keeping the lifetime usufruct. It is sold as a way to move the asset out of the estate. For an American it may do the reverse — and in failing, preserve the very basis adjustment this page is about. See the nuda propiedad gift and the American donor.

The same couple, four ways

A joint portfolio worth $5,000,000, cost basis $1,000,000, first death after the move to Spain.

Illustrative only, and deliberately simplified: it ignores US state law, the situs of each asset, the treaty position on gains, and the second death. The columns are not ranked. Which one is best is the question, not the answer.

What it costs, and who should not do this

Four reasons to walk away from the idea, which we would rather say plainly than bury.

You are giving away half of your future income. Not for tax purposes — actually. Gananciales is a real property regime with real consequences on divorce, and article 1347.2º means your dividends are your spouse's from the day it starts. If you would not hand over half of everything you earn from here on, do not sign this for a basis adjustment. Our page on divorce and your Spanish residency is the other side of this coin.

If your spouse is not a US citizen, the gift tax rules change everything. Converting separate property into community property is a transfer, and between US citizen spouses the unlimited marital deduction absorbs it. Where the recipient spouse is not a US citizen, §2523(i) replaces that with an annual ceiling — $194,000 for 2026 — and a retroactive conversion of a multi-million dollar portfolio would blow straight through it. If this is your situation, start instead with our page on US estate tax and the non-citizen spouse, because the QDOT problem is bigger than the basis one.

Your retirement accounts are not invited. §1014(c) denies any step-up to property that is a right to receive income in respect of a decedent, which is what an IRA is. No matrimonial regime changes that on either side of the Atlantic — see our page on the inherited IRA and the 10-year rule. If your wealth is mostly in tax-deferred accounts, this page is not about you.

The benefit may be theoretical while you stay. A US citizen selling securities while Spanish-resident is generally looking at Spain as the primary taxing state under the treaty, with the US position resolved by credit and re-sourcing — our guide to the US–Spain tax treaty for retirees works through the machinery, and the 3.8% net investment income tax is the one line where it fails. The double step-up earns its keep when the American side is doing the taxing on its own: US-situs real property, or a widow who sells after going home to be near the grandchildren. That second scenario is not an edge case. It is the most common ending we see.

What we actually do with this, in practice, is unglamorous. We establish which law currently governs your regime, which is a question of your wedding date and your first married address and takes about a minute. We ask where the surviving spouse expects to be, and where the children are. We ask your US adviser to put their view of §1014(b)(6) in writing before anything is signed, because it is their call and not ours. And then, if it still makes sense, the deed gets drafted properly — with the retroactivity question answered on purpose rather than by default. As a Málaga Bar–registered lawyer the Spanish side is ours; the American side belongs with your own advisers, and this only works when both are in the room.

Sources reviewed July 2026, all read in the primary text rather than cited from memory. United States: IRC §1014, and in particular §1014(b)(6) (surviving spouse's one-half share of community property held "under the community property laws of any State, or possession of the United States or any foreign country", conditioned on at least one-half of the whole of the community interest being includible in the decedent's gross estate under chapter 11), §1014(b)(9) (property includible in the gross estate by reason of death or form of ownership) and §1014(c) (no adjustment for a right to receive income in respect of a decedent); the 1976 amendment by Pub. L. 94-455 §1901(c)(8) striking "Territory," from §1014(b)(6) and (7); §2010(c)(3) as amended, giving a basic exclusion amount of $15,000,000 for 2026; §2523 (marital deduction) and §2523(i) (annual limit for gifts to a spouse who is not a US citizen, $194,000 for 2026); Rev. Rul. 87-98 for the principle that community property under the governing property law is community property for §1014(b)(6). European Union: Council Regulation (EU) 2016/1103 of 24 June 2016, articles 20 (universal application), 21 (unity of the applicable law), 22 (choice of the applicable law; prospective effect unless the spouses agree otherwise; protection of third parties), 26 (applicable law in the absence of choice) and 69(3) (Chapter III applies only to spouses who marry or who specify the applicable law after 29 January 2019). Spain: Código Civil, texto consolidado del BOE (BOE-A-1889-4763, última actualización 3 de enero de 2025), articles 9.2, 9.3, 1315, 1316, 1325, 1326, 1327, 1333, 1344, 1346, 1347, 1361, 1392 and 1404; the characterisation of the sociedad de gananciales as a comunidad germánica without attribution of shares in Tribunal Supremo case law and majority doctrine; Ley 35/2006 del IRPF articles 33.3.b) (no gain or loss on transfers by reason of the death of the taxpayer) and 36 (acquisition value on lucrative transfers determined by the inheritance tax rules, capped at market value). General information only, and not legal, tax, immigration or US tax advice. In particular, the application of §1014(b)(6) to the Spanish sociedad de gananciales is our reading of two bodies of law that have not, so far as we have found, been squarely addressed together by the IRS or any court; that reading, the gift tax consequences of any conversion, the retroactivity of any capitulaciones, the regional inheritance and wealth tax position, and the interaction with your US returns must all be confirmed for your own facts by Spanish and US advisers before you rely on them.

This page is general information about Spanish immigration and residence planning. It is not legal, tax or US tax advice, and no lawyer–client relationship arises from reading it.