“Community property” is a legal term that refers to how property and income obtained during a marriage are treated. Community property laws directly impact the probate procedure and the determination of inheritance.
All assets (including income) acquired or gained during a marriage are presumed to be the property of both spouses. In this system, everything a husband and wife acquire once they are married is owned equally (fifty-fifty) by both, regardless of who provided the money to purchase the asset or whose name the asset is held in.
Importance of community property
The idea of community property was developed to protect the right of married couples.
How the community property work
As a first step, it covers all income made or gained during the marriage in a community property state by one or both partners. All earned income (called “community income”), property purchased with community revenue, savings, and retirement accounts. Debts are included in the total to be divided because they are considered a part of community property.
Property purchased after a legal separation is not considered community property, even if both partners possessed it before marriage. If one spouse receives a gift or an inheritance during the marriage, that gift or inheritance is not included.
Any debts incurred before the marriage are solely the responsibility of the individual who incurred them. The portion of the property purchased using communal funds is deemed shared, while the part purchased using individual funds is not.
In general, unless the parties agree otherwise, a court in a community property state will divide all other assets equally in the event of a divorce. This often necessitates the sale of any shared property to split the proceeds amongst the former partners.
Difference between common property and property in a common law marriage
For example, in a common-law state, if one spouse acquires a car or boat and the title is only in their name, the vehicle or boat becomes their property. In comparison, if the couple resided in a community property state, the vehicle would instantly become the property of both spouses unless the individual who purchased it paid for it with their independent assets.
A common law property state divides marital assets in a divorce. The notion of fair distribution is at the heart of everything. Some argue that property ownership is fundamentally unfair because of the disparities in a couple’s financial demands, ages and health, and degrees of educational attainment and employment readiness that exist between them.
Fairness, but not equal distribution, can be achieved by taking these considerations into account. To make a settlement equitable to both parties in some of these states, some judges may demand that one spouse use their own property.
On their own or with the help of a neutral person, such as a mediator, divorcing couples generally work out how they wish to divide their assets and obligations. Couples who can’t agree on property partition will have their case heard by a court, which will use state law.
The lifespan of community property
A married couple in a state where community property applies has the money and assets they’ve accrued during their marriage as “community property.”
This indicates that each spouse is entitled to an equal one-half share of the property (regardless of how property is titled). If a spouse dies without a will, the surviving spouse inherits the deceased spouse’s part of the community property depending on the duration of the probate. This ownership is for life.
History of community property
Wives in ancient Rome had little property rights; whatever they possessed became the property of their husbands upon marriage. Copartnership-in-acquisition systems existed in parts of Spain, France, and Germany. Under English common law, wives were regarded as extensions of their husbands and were not permitted to hold property.
The community-property system categorizes property acquired as community or separate, regardless of the partners’ declarations—although contractual provisions between husband and wife may vary this classification. Separate property must be held and used by one spouse solely. Generally, property obtained before marriage does not become community property. Most community-property statutes define what property acquired after marriage is deemed separate and what property is considered common.
The classification of the property is determined by common sense. For instance, both spouses’ earnings are community property, whereas gifts to one spouse are considered separate property. Generally, any property-related profits (rent, interest, or dividends) are classified according to the type of property that generates them.
Where community and separate property are combined, the entire thing is believed to be community property unless a sizable portion is separated. In cases involving property classification, the presumption is always favoring the communal category.
Previously, the spouse had the exclusive power to control community property, but numerous statutes have reduced this privilege.