Separate and community property are two categories used to distinguish whether property is owned by one or both spouses in a marriage. Community property, as the name suggests, is everything that a husband and wife own together. Community property generally includes:
- All income earned by either spouse during the marriage;
- All debts incurred during the marriage;
- Real estate obtained during the marriage;
- Money held in joint bank accounts; and
- Personal property obtained during the marriage (e.g. vehicles, furniture, jewelry, etc.).
In contrast, separate property is property that is owned by an individual spouse. Property that remains separate during a marriage usually includes:
- Property owned by a spouse before the marriage;
- Property obtained by a spouse after a legal separation;
- Property received as a gift or inheritance; and
- Debts incurred by one spouse before the marriage.
There are nine states that recognize community property law: Arizona, California, Idaho, Louisiana, Nevada, New Mexico, Texas, Washington, and Wisconsin.
Can I Change Separate Property into Community Property?
For a variety of reasons, spouses may want to change the status or ownership of their separate or community property. Commonly, re-characterizing property is done for convenience or beneficial tax purposes. Generally, property can be changed from separate property to community property through a prenuptial/postnuptial agreement or a legal process known as transmutation.
What is a Prenuptial Agreement?
A prenuptial/postnuptial agreement is a contract between spouses either before or during the marriage that specifies how they will divide their property, debts, income and expenses. While many associate these agreements with how property will be treated in the event of the death of a spouse or divorce, they can also cover a range of other issues, such as how property will be classified during marriage.
What is a Transmutation?
Transmutation is simply the process of changing the character of marital property from separate to communal or communal to separate. Separate property can be transmuted into community property by any of the following methods:
- Jointly titling property in the name of both spouses; and/or
- Commingling separate assets with community assets (i.e. combining separate property with marriage property, for example putting income earned before the marriage into a joint banking account).
Do I Need Family Lawyer?
How property is characterized can have important consequences during a marriage and even more so in the event of divorce. A local family lawyer can help you navigate these complicated legal measures regarding marital property and ensure that your interests are properly protected.