Chapter 4

Community Property

Community Property

• 9 states have community property laws

• A marriage is a “community”. Everything that is earned inside the marriage belongs to the two partners ….. It is community property.

• Presumption – property owned by husband and wife belongs to them in equal shares.

What is Community Property?What is not Community Property?

• Assets acquired during marriage are generally considered community property.

• Property that was brought into the marriage is not community property?

• Property that is inherited or received by gift is not community property.

• The character of an asset, separate or community, is established at the time the asset is acquired and is not altered by later events.

What is a Pre-Nup??

• Legally binding agreement between two individuals in anticipation of marriage.

• Full force and effect of an arms-length contract

• Can provide protection of one’s estate for one’s intended beneficiaries

• Pre-nuptual agreements can provide an inventory of assets brought into the marriage and the intended dispostions.

Common Law versus Community Property States

• The concept of joint tenancy with right of survivorship is embraced by common-law states.

• None of the community property states recognize the tenancy-by-the-entireties form of ownership, and joint tenancy with right of survivorship is restricted (page 79). Joint ownership does not “trump” or supercede the community presumption.

• Generally, community property is probate property.

Commingling of Property

• Life Insurance – generally, trace the source of the money applied to the premium payments to determine the character of the policy (separate versus community).

• Business – was business started before the marriage? How much of the profits during the community are attributable to the appreciation in value.

• Debts – separate property is not subject to claims by the other spouse’s debts. If both spouses sign on the debt, then that spouse’s separate property is subject to claim.

Moving In and Out of Community Property States

• It gets very complex and confusing when a married couple moves into and out of community property states from common law states. This requires a legal review including wills, trust, pre-nuptual agree-ments etc. etc.

• Despite this, more than 1/3 of the common law states recognizes community property as retaining its community property identity at death when spouses move from a community property state from common law states.