The grand deed now has the trust as owner of the property. How does this effect the cost basis if my wife or myself dies first?
You need to see your estate planning attorney. Unless you transmuted title to community property, the property remains your separate property. If your wife dies first, your basis stays the same. If the property were transmuted to community property the value would step up to fair market value regardless of the order of death.
Note, the property is separate. If you were to get divorced, you keep it. If you transmute the property, your wife is entitled to half (this is a bit of a summary, there are some complexities that are not necessary to get into).
The general advice above does not constitute an attorney-client relationship: you haven't hired me or my firm or given me confidential information by posting on this public forum, and my answer on this public forum does not constitute attorney-client advice. IRS Circular 230 Disclosure: In order to comply with requirements imposed by the Internal Revenue Service, we inform you that any U.S. tax advice contained in this communication (including any attachments) is not intended to be used, and cannot be used, for the purpose of (i) avoiding penalties under the Internal Revenue Code or (ii) promoting, marketing, or recommending to another party any transaction or matter addressed herein.
I agree with the prior attorney but want to add that if you wish to transfer the property to you as husband and wife in order to get the step up upon the death of the first spouse to die, make sure you use the words that you are hereby "transmuting" your separate property into community property and hereby hold it as Husband and Wife as Community Property with right of Survivorship. This gets a complete step up at the time of either party's death. Don't hold it as Husband and Wife as Joint Tenants as you will only get a step up on the deceased spouse's interest rather than a double step up in basis.