In the context of marriage, divorce, or legal separation, community property is property both spouses own. It differs from separate property, which is owned by one spouse individually. States vary concerning how property is classified, whether separate or joint.
Generally, any property that a married couple obtains during the marriage is considered community property. If the partners divorce or separate, then both spouses own an undivided share of the community property.
States that follow community property laws start with a strong presumption that anything acquired during the marriage is a community item. As such, a spouse who wants to claim a specific piece of property is all theirs and thus is arguing that the particular item is separate property has the burden of proving their claim. The court will presume that it is not separate property.
Nine states follow community property rules. These are Arizona, California, Idaho, Louisiana, Nevada, New Mexico, Texas, Washington, and Wisconsin. Puerto Rico is also a community property jurisdiction.
How Do Community Property States Differ from Others?
In a community property state, generally, any property or assets that a married couple accumulates during the marriage is considered community property and thus belongs 50/50 to both.
In non-community property states, courts will divide property in a plan of “equitable distribution.” Under these laws, the property may be divided in a case-by-case manner according to what the court determines to be “fair” or “equitable.” This can be determined through an examination of various factors, including:
- How long the marriage arrangement lasted
- Whether any specific property agreements between the spouses might affect the property distribution (such as a prenuptial or postnuptial agreement)
- The financial condition of each spouse at the time they entered the marriage
- Characteristics of each spouse, including age, employment, and health
- The overall character and disposition of each person’s estate
Thus, property division for a divorce in an equitable distribution state might not follow an exact 50/50 split or division of the property. However, this is usually considered acceptable, as the court will seek to determine a division of property that is considered most fair.
In comparing the two types of state property laws, community property states tend to be more straightforward when making a property division. After all, the entire body of property is to be simply divided in half. Equitable distribution states must use more complex determinations.
In both community and equitable distribution states, marital misconduct, such as infidelity, typically is not a factor in determining property distribution. However, if a spouse attempts to hide or spend assets before the divorce, then the court can punish them when it is time to distribute the assets.
Are There Any Exceptions to the Presumption of Community Property?
There are exceptions to the presumption that all property is community property. The following are assets that are common exceptions to the community property rule (that is, they are treated as separate property):
- Property acquired before the marriage began
- Inheritances and gifts (such as property received through a will or gifts made before the parties were married)
- Heirlooms (usually valuable items kept in the family, such as jewelry)
- Property used wholly or principally for business purposes
- Property acquired under a trust
- Property that the partners declare by agreement to be separate property
- Property obtained with the proceeds of separate property that is sold and was not intended for the use or benefit of both partners
- Property acquired when the couple was separated or living apart. Generally, spouses are regarded by the law as living separately and apart when one clearly informs the other that they do not wish for the marriage to continue.
- To be considered living separately and apart, the spouses should also reside in different homes.
For property to be classified as separate property, it must be clear that it was intended to be separate property. For separate property to remain separate, it is important to remember that you must treat the property as separate property. If you declare a home you owned before marriage as separate property and rent it out and receive income that you declare to be separate, do not co-mingle that income with shared income. Keep it separate, or it will lose its identity as separate property.
Perhaps the most clearly defined pieces of separate property are those items declared separate property through an agreement between the parties. Thus, if there are any specific property items or assets the parties don’t want to be classified as shared property, they should write an agreement and list the property as separate. This is typically done through a legal document such as a prenuptial agreement.
First example: The wife owned a house when she was single. After the couple married, she sold the house and put the proceeds into a separate bank account that Husband never had access to. He could not withdraw or deposit any money into the account. The wife never used the money in that account for something the husband would benefit from. Instead, she used the money to send her parents on a vacation and to buy herself some new clothes.
When they divorced, the husband attempted to argue that the assets in that the money in that account was community property, as the money was put into the account after they were married. In this case, the court will likely say that the assets in that account are solely hers. She took definitive steps to prevent her husband from having access to it and never used any of the funds to benefit the marital community. She may have placed the money into the account after the wedding, but the money’s source can be traced to an asset (the house) she owned before marriage.
Second example: The wife owned a house before marriage, and the husband verbally agreed that the house and all assets related to the house belonged to her alone. Wife rents out the home and generates rental income. She even puts the rental income in a separate account.
However, the husband has access to the account. While he may not withdraw money from it, they sometimes use it to fix broken items around their shared home. His wife even used money from the rental income to take them on a joint vacation and pay bills.
Her behavior might persuade the court that the rental income assets have not been separated sufficiently. Even though she and her husband agreed that the home was hers before they married and would remain hers during the marriage, she risks having it be considered community property. She made five mistakes:
- She did not get the agreement with her husband in writing
- She gave her husband access to the account
- She used some of the money to fix up their shared property (the home)
- She used some of the money to take both spouses on a joint vacation
- She used some of the money to pay joint bills.
To avoid this result, she should have spent the money only on (a) things for herself or (b) things for the separate home. She also should not have given her husband access to the account.
What if My Spouse and I Acquired Property while Living in Another State?
Community property states will typically categorize this property as “quasi-community property.” Quasi-community property is usually defined as property acquired by either spouse in a non-community property state that would have been community property had the couple been living in a community property state at the time of the acquisition.
While the couple is married, quasi-community property is generally treated as separate property belonging to the spouse who acquired it (as long as the acquiring spouse treats it as separate property).
If the couple divorces, quasi-community property is typically treated as if it were community property. This means that quasi-community property is split equally between the spouses.
Do I Need a Divorce Attorney for My Divorce in a Community Property State?
Divorce proceedings can be very complicated, and the distribution of property can be complex. An experienced divorce lawyer in your area can help you determine how your state’s laws will affect your divorce. A lawyer can also represent you in court if a dispute arises over the distribution of property or any other legal issues.