01 Jul What is a Community Property State and Do You Live in One?
In approximately 9 states, Arizona, California, Idaho, Louisiana, Nevada, New Mexico, Texas, Washington, and Wisconsin (with Alaska offering couples the option to opt into the system), property ownership follows a system referred to as community property. The division of property and assets during a divorce can occur much differently in these states. If you live in one of these states and are seeking a divorce, some closer inspection may be necessary to determine how property and assets will be divided between you and your spouse.
It is important to know which property falls under community property. Even within these states, not everything you own is considered jointly owned. Instead, there are a few rules to follow when determining whether your property or asset is community property (or not). First, if you and your spouse bought or otherwise attained a piece of property or asset while both you and your spouse resided in a community property state, then that property is community property and thus considered to be jointly owned between you and your spouse. Secondly, if you or your spouse owned property that was previously separate property, but you decided to convert it to community property, then, of course, the property will be considered jointly owned as well. Finally, if the individuals or the court cannot identify an asset as separate property, then it will be considered community property. The distinction in this final aspect can be convincing. Consult your attorney if you are confused or worry this applies to you.
Those are the only three rules that render something community property. On the other hand, there are a variety of situations that render property as separate that also deserve mentioning. Any property that you or your spouse owned separately before your marriage is still considered separate. This remains true, of course unless you and your spouse converted said property to community property as mentioned before. Conversely, any property that you and your spouse legally converted to separate property during your marriage is considered separate. Furthermore, any earned money acquired while residing in a state recognizing the common law system is considered separate as well even after returning to a community property state. Finally, any property you or your spouse acquired using separate money or as a trade for separate property is also considered separate and not jointly owned. In this same way, any inheritance or gifts that you or your spouse received separately is not considered community property.
Generally speaking then, while a married couple is residing in a community property state, any money earned by either spouse or property purchased using that money, is considered community property and thus jointly owned. During a divorce, then, all community owned property should be divided equally with half of all community owned property going to each spouse. Of added significance, these rules also apply to debts incurred related to money earned by either spouse while residing in a community property state. Furthermore, many of these rules also apply to inheritances and wills in community property states. If a spouse bequeaths property to another individual in a will, but the property is jointly owned as community property, then the other spouse may have a claim to at least half of the property if not all; though, rules surrounding these aspects differ in some ways from the rules mentioned here.
Living in a community property state can be beneficial or harmful to an individual seeking a divorce, but knowing the rules and regulations for your state can only help. If you live in Arizona, California, Idaho, Louisiana, Nevada, New Mexico, Texas, Washington, or Wisconsin, or if you reside in Alaska and you and your spouse opted to follow the community property system, and if you are also considering a divorce, speak to your attorney about the rules in your state and how its particular rules could affect you and your case.