Division of property can be one of the most complicated elements of a divorce or separation. If you live in a community property state, you will want to have an idea of what that means regarding the property you and your ex-spouse share.
What Is Community Property?
In most cases, community property is marital property the husband and wife own together. With community property, each spouse might have an automatic half-interest in the property and debts acquired during the marriage. Assets acquired before the date of marriage or after the date of separation are usually not included in this calculation. Community property can include the following:
- Income received by either spouse during the marriage
- Property acquired with income earned during the marriage, including vehicles, homes, and luxury items
- Debts acquired during the marriage
Community Property States
There are nine community property states in the United States. They are:
- Arizona - When dividing assets, Arizona courts consider any debts and obligations attached to the property, the property's exempt status, and whether there have been crimes convicted that financially damaged the other person.
- California - Each party lists separate property in a Preliminary Declaration of Disclosure form for the other party, so the courts can divide the property fairly.
- Idaho - Courts consider factors in the division of property such as the length of the marriage, prenuptial agreement, the age, health, occupation, income, employability and vocational skills of each party, and each person's income.
- Louisiana - Both parties have an equal interest in assets and debt acquired during the marriage.
- Nevada - Courts strive to divide property as equally as possible, considering relevant factors on a case-by-case basis.
- New Mexico - Any property that isn't separate property acquired by either or both parties during the marriage is distributed evenly.
- Texas - When distributing property, courts consider factors such as whether there is any fault or blame for the divorce, the health of both parties, each person's education, income, and future earning ability, which party is raising the children, and the parties' debts.
- Washington - Courts consider the type and value of all the property, the length of the marriage, and each party's financial circumstances as well as what is best for the children.
- Wisconsin - Courts consider factors such as the duration of the marriage, each spouse's premarital property, each party's contributions to the marriage, age and health of each spouse, and earning abilities.
Opt-In Community Property States
Three states allow marital partners to opt-in to community property ownership through a written agreement signed by both parties. These states are Alaska, Tennessee, and South Dakota.
- Alaska - In Alaska, spouses who wish to treat their assets as community property can establish a trust designating certain assets as community property. They can also enter into a community property agreement stating that all or certain assets acquired during the marriage are community property.
- Tennessee - In Tennessee, spouses can opt-in to a community property arrangement by establishing a trust. To do this, a couple will need to establish a Tennessee community property trust following the state's guidelines.
- South Dakota -In South Dakota, spouses can create a spousal trust declaring that any property placed in the trust is considered community property. The spouses can choose to place any or all of their assets in the trust.
Property Division in Community Property States
Courts in community property states typically divide all marital property equally between spouses in a divorce. The division of property may be in the form of one spouse retaining the titles to certain marital assets, such as the house or a vacation home, and the other receiving a combination of some assets and a cash payment to make up any difference in value. This way, each person leaves the marriage with an equal amount of marital property.
Not All Property Is Marital Property
Not all property the couple owns is considered marital property. Anything that is not considered marital property is not divided equally in community property states. Marital property typically excludes:
- Property acquired before the marriage or after the date of separation
- Cash received by one of the spouses as a gift or inheritance
- Property received by one of the spouses as a gift or inheritance (as long as the property is in one spouse's name only)
States Without Community Property Laws
The states not on this list do not have community property laws and are considered common law property states. In these states, the property acquired during the marriage belongs specifically to the person who acquired it, unless the property is in both parties' names. In the event of a divorce, it doesn't necessarily mean each person will receive an equal share of the property. In some states, a judge may order a spouse to transfer separate property to his or her spouse to make the divorce settlement fair for both of them.
Dividing Your Community Property Assets
If you live in a community property state and are curious about how your assets will be distributed in your divorce, consider seeking legal advice. An attorney will review your assets and debts, and discuss the type and amount of property you could be awarded according to the laws in your state.