Exceptions to the Community Property Presumption Upon Divorce

Parties seeking a divorce must apply for an order from a court called a divorce decree. The divorce decree officially terminates the marriage. Before the divorce is finalized, the court must address how to distribute property that was owned by the couple. Courts must determine whether a given piece of real property is community property (i.e., property jointly owned by the spouses), or separate property. 

What is Community Property?

In those states that are community property states, the law presumes that property acquired during marriage is community property. Community property is defined as all property and money that was acquired by the couple during the time they were married. Community property is jointly owned property. Each spouse has an equal interest in, and equal access to, community property. When spouses get divorced, community property is divided equally. 

Community property includes:

• Real property (i.e., land, houses)
• Personal property (i.e., furniture, artwork, antiques)
• Assets that are not tangible (i.e., bonds, mutual funds, stocks)

Community property also includes debts shared between the spouses. Examples of such debts include:

• Loan monies owed to creditors
• Mortgages
• Liens
  

 The nine community property states currently include:

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

In community property states, the law provides for a presumption of community property.  This means the law presumes that any property acquired while the couple was married is community property. 

There are exceptions to this presumption of community property. That is, under some circumstances, the law will regard property not as community property, but as separate property of just one spouse. The presumption of community property does not apply to property that:

• Was given to one spouse, as a gift;
• Was received by one spouse through someone’s will, or through a trust fund;
• Was received by one spouse as an inheritance; 
• Was acquired by a spouse before the spouses were married;
• Was acquired by one spouse with just that spouse’s money, and not the money of the other spouse; or
• Was acquired when the couple was separated or living apart. Generally, spouses are regarded by the law as living separate and apart when one clearly informs the other that they do not wish for the marriage to continue. To be considered living separate and apart, the spouses must generally also physically reside in different locations.

What is Separate Property?

In states that are not community property states, property is generally considered separate property. Separate property is property that each spouse owns individually. 

Examples of separate property include:

• Gifts and inheritances one spouse receives, whether before or during the marriage;
• Any property that was owned by one spouse before the parties got married;
• Property that a spouse acquires using their own separate property assets. For this property to be considered separate property, the spouse who acquires it must intend to keep it separate from the other spouse’s property;
• Property that is acquired while the parties are married, that is in one spouse’s name, and only used for the benefit or enjoyment of that spouse and not the other spouse; and
• Property a spouse acquires when the parties are living separate from each other.

Some states allow couples to enter into post-nuptial agreements. Under this kind of agreement, the spouses agree in writing that specific items of property are separate, as opposed to jointly-held. Postnuptial agreements allow spouses to agree as to what property they wish to keep separate. 

A postnuptial agreement is basically a contract. If one party does not abide by its terms, that party has breached the contract. The other party can file a lawsuit to have the terms of the contract enforced. 

Can Separate Property Become Community Property?

Sometimes, property that is separate property can become community property.  For this to happen, the couple must take specific action that indicates they wish for the separate property to become community property. For example, suppose that each spouse puts money that is their own, separate property into a joint bank account to which the spouses have equal access. In such cases, the law regards the money in the joint bank account as community property, to be equally shared.

In addition, some states that are separate property states, allow spouses to enter into a community property agreement. Under this agreement, property acquired during the marriage is considered to be community property, unless an exception to the presumption of marital property applies.

Do I Need a Lawyer for Help With Determining Whether Property is Separate or Community?

If you are contemplating divorce, or have undergone a divorce, and want to make sure that you receive all property state law allows you to receive, you should contact a divorce lawyer. An experienced divorce lawyer near you can advise you as to whether property is separate or community property. Your lawyer can answer your questions about your state’s marital property laws, and can represent you in court.