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Contents Community property consists of all property (and debts) acquired during the marriage. There are two major exceptions to this rule. First, the property of a spouse acquired by gift or inheritance during the marriage is the separate property of that spouse. Second, disability payments, worker's compensation benefits and damages from a personal injury lawsuit may be the separate property of the injured spouse. Each spouse owns one-half of all community property, regardless of whether it was "earned" by only one spouse or held in that spouse's name. The rationale for the community property laws is that marriage is a partnership to which each spouse makes valuable contributions, regardless of whether he or she works outside of the home. Thus, each spouse is entitled to 50% of the community property upon the dissolution of the parties' marriage. Separate property is property owned by either spouse before marriage or after the date of separation. In a marital dissolution proceeding, each spouse is entitled to keep all of his or her separate property. The "date of separation" is generally the date that one spouse moves out of the house, although it is sometimes the date that the parties cease holding themselves out as a married couple. The date of separation is important, because it fixes the date on which each party's income is treated as that party's separate property. The date of separation is also important for fixing the date on which debts incurred by one spouse are the responsibility of that spouse. Debts incurred during the marriage are community debts (with some exceptions such as student loans, which are generally considered separate property debts). Each spouse is responsible for one-half of the balance of community debts such as credit card balances, even if the card is in one spouse's name only. But in most cases, debts incurred after the date of separation are the sole responsibility of the person incurring the debts. Can an asset consist of both community and separate interests? Yes. The issue of whether an asset is separate or community is not always straightforward. For example, during your marriage you and your spouse may have purchased a house together, and paid for your mortgage out of earnings acquired during the marriage. However, one of you may have used separate property (e.g., a gift from your parents) for your down payment. In such a case, the house might be treated as a community asset, subject to one party's right of reimbursement for the amount of his or her separate property contribution. There are numerous other situations where community and separate property interests might become "commingled." For example, one spouse might deposit an inheritance (separate) into a joint savings account holding earnings acquired during marriage (community). Or one spouse may have owned a business before marriage (separate) for which he or she continued to perform services during the marriage (community). In these cases, it is often necessary to obtain appraisals and gather bank records and other financial documents in order to determine the relative values of the separate and community interests in an asset. How is community property divided? The easiest way to divide your community property is to agree upon an equal division with your spouse. Liquid assets such as bank accounts can easily be divided in half. However, illiquid assets such as real estate, business interests, pensions and personal effects cannot be so easily divided. In these cases, each of you might decide to receive different items of property which, when aggregated together, are of equal value. For example, if your spouse gets the furniture and appliances, you get the family car. In some cases, it might be necessary to sell an asset to accomplish an equal division of community property. For example, if your residence is your most valuable asset, all your other possessions added together may not equal the value of your home. In such a case, it might be necessary to sell the home and divide the sale proceeds equally between you and your spouse. Or the two of you might agree to defer the sale of the home until your children become adults. There are numerous ways that community property can be divided. A family law attorney can assist you in discussing these options. |
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