Community Property Overview
By Jade Chounlamountry, Esq. | Legally reviewed by Melissa Bender, Esq. | Last reviewed November 13, 2024
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Community property is a legal principle that any property acquired during a marriage belongs to both parties equally. States that use this principle are community property states.
In the event of a divorce in a community property state, the court will divide the marital property equally (50/50) between the former married couple. During the divorce process, the court may also consider debt in the division of property.
This FindLaw article explores community property laws, types of community property and factors that courts use to divide property.
Community Property Laws
Absent a prenuptial agreement or postnuptial agreement, the state law where you file for divorce will dictate how a court divides assets. States have adopted two approaches for dividing assets during divorce proceedings. State laws determine whether courts divide assets under community property or equitable distribution.
Nine states (and Puerto Rico) have community property laws for the division of assets. These states include:
Arizona
California
Idaho
Louisiana
Nevada
New Mexico
Texas
Washington
Wisconsin
These states divide assets and debt "equally" (50/50). Both spouses have an equal interest in the property and are entitled to an equal share.
The other states (except Alaska) follow equitable distribution. A judge decides what is equitable or fair by considering many different factors. Fairness, not equality, is the goal of equitable distribution.
Alaska is unique because divorcing couples have options to divide marital property.
If you're divorcing in a community property state, it's essential to know how this can affect your money and legal rights. Keep in mind that you and your former spouse can always reach a settlement agreement to divide property through mediation.
Community Property vs. Separate Property
In most cases, property obtained during a marriage is community property. This means both spouses have property rights to assets acquired in the marriage. Assets include things like income, real estate, investments, and personal belongings. Property such as stock options are rarely considered community property.
Community Property Examples
Examples of community property may include:
Wages earned by either spouse during the marriage
Home and furniture purchased during the marriage with marital earnings
Interest income earned by business investments and operations
Mortgages and the family home
Liabilities or debts incurred during the marriage
Retirement accounts
Separate Property
Separate property, by contrast includes personal property and other assets was owned prior to the marriage. Separate property is non-marital property inherited or received as a gift during the marriage and anything either spouse earned after the date of the legal separation.
Note: If only one spouse's name is on the title, it does not automatically make it separate property.
Examples of separate property may include:
Separately funded bank accounts
Inheritances acquired during a marriage, if held separately
Gifts to either spouse
Personal injury proceeds
Any property acquired after the dissolution of a marriage
Partial Community Property
Courts have also defined some property as “partial" or “quasi" community property. Separate property can become marital property during the marriage. Co-mingling and other factors can reclassify property in a divorce.
Factors Courts Use to Divide Property
A judge considers many factors when dividing assets in divorce proceedings. The three primary factors are 1) the earning capacity of each spouse, 2) which parent is the legal caretaker of the children (if any), and 3) whether fault grounds such as adultery or cruelty exist.
Therefore, even in community property states, property may not always be divided 50/50. Instead, courts will look at the following factors to determine if a disproportionate division of property is necessary:
Marital Fault: One spouse may receive more of the marital assets if one spouse is more at fault for the divorce (such as adultery, cruelty, etc.)
Loss of Continuing Benefit: Whether one spouse will lose out on a benefit they would have if the marriage continued
Disparity of Earning Capacities: Income gaps, earning capabilities, and business opportunities may influence the division of property. For example, the court may award spousal support if there is a large disparity in income
Health and Physical Conditions: Whether the physical health or condition of the spouses may affect the division of property
Age Differences: Whether there is a disparity in the ages of the spouses, which may affect one's ability to work or receive retirement benefits
Size of Estate: The size of the estate can affect the division of property. Generally, the larger the estate, the more the court may reward a 50/50 division
Anticipated Inheritances: Whether one of the spouses stands to receive a large inheritance
Gifts to a Spouse: Gifts are usually converted to separate property after a divorce
Custody of Children: A spouse who gains primary custody of children under 18 may affect the division of property
Get Legal Help
The equitable division of property is an important aspect of the divorce process. A qualified divorce attorney can help you navigate all aspects of the divorce process. They are family law experts and can give you sound legal advice. Speak to an experienced local divorce attor
Can I Solve This on My Own or Do I Need an Attorney?
- You may not need an attorney for a simple divorce with uncontested issues
- Legal advice is critical to protect your interests in a contested divorce
- Divorce lawyers can help secure fair custody/visitation, support, and property division
An attorney is a skilled advocate during negotiations and court proceedings. Many attorneys offer free consultations.
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Don't Forget About Estate Planning
Divorce is an ideal time to review your beneficiary designations on life insurance, bank accounts, and retirement accounts. You need to change your estate planning forms to reflect any new choices about your personal representative and beneficiaries. You can change your power of attorney if you named your ex-spouse as your agent. Also, change your health care directive to remove them from making your health care decisions.