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What Is Community Property?

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Published on February 2, 2021
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Marriage is a partnership; it unifies two people’s lives, their experiences, and in some states, their assets. Though it varies, these states have community property laws that require that spouses share ownership of things like income and even loss, such as debt. Here is what you need to know if you live in a community property state:

Community Property: A Definition

Community property is a law certain states implement to designate ownership of any assets obtained over the marriage’s timespan. So, in the states where this is the law, couples have equal and joint ownership of assets like income, property, and even debt.

Marital Property

Community property laws only cover assets that are bought or obtained throughout the marriage. For example, if a spouse uses their individual earnings to purchase a car, both spouses still own that car equally. However, this only extends to purchases made during the course of the marriage.

Separate Property

Community property laws only extend to assets obtained between the beginning and the end of the marriage. Any assets acquired before the marriage begins or after it dissolves is considered separate property. This type of property only belongs to the original owner and can include:

  • Property owned by an individual prior to the marriage
  • Property purchased or received by individual following a legal separation
  • Gifts of inheritances given to either spouse during the course of their marriage

A spouse can share ownership of their separate property by either transferring the property title to their partner or adding their partner’s name to the deed or account.

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What Is A Community Property State?

Most states use common law to identify property. However, as of 2021, there are nine community property states where equal asset sharing is the law:

  • Arizona 
  • California
  • Idaho
  • Louisiana 
  • Nevada
  • New Mexico
  • Texas
  • Washington
  • Wisconsin

While Alaska is not one of the nine community property states, it offers married couples the chance to opt for community property status through a written contract.

How Community Property Is Managed

Community property laws function differently depending on the situation. Here are a few examples:

Separation And Divorce

If a couple divorces or chooses a legal separation, community property laws generally entitle each spouse to equal portioning of the marital or community property. Sometimes, the asset division is based on value instead of quantity. This is most common with houses. The court will award the home to one spouse, while the other receives assets valued equal to half of the home. Each partner keeps his or her separate property as well.

Death 

In the event that one spouse passes, community property laws dictate that the surviving spouse receives their partner’s half of the property. So, they possess full ownership of all marital assets. Each state with community property laws may vary, however. If a life estate plan is not made before the first spouse passes, the state’s intestate laws will then determine how the deceased spouse’s separate property is divvied.

Community Property With Right Of Survivorship

Some community property states, such as California, offers married couples the option to keep their assets after a spouse’s death with the right of survivorship. Thanks to this agreement, the spouse can only will away ownership of community property to their surviving spouse. As a result of this decision, the couple avoids probate.

Quasi-Community Pro

Sometimes, your property ownership can shift depending on where you live. For example, you and your partner moved to California from a common law state where you worked. Now, you’re getting a divorce while living in California. Those earnings you made in your previous state are quasi-community property (because they’d be community property in California), so they’ll be treated the same as community property.

Bottom Line

Community property implements equal, shared ownership of assets between a married couple. It heavily affects future decisions such as divorce, death, or even something as simple as moving. If you are married or intend to get married, be sure to research what laws may affect real estate you and your partner are interested in so that you can stay informed and prepared.

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