Community and Separate Property During Marriage

What is the Difference Between Community and Separate Property During Marriage?

When you get married, you agree to share more than just your feelings — you also share property with your spouse. But when you divorce, what property must you share and what remains your own? California is a community property state and knowing who owns what according to the law can be helpful for many reasons, including drafting a prenuptial agreement, estate planning, or if the marriage ends in divorce. With respect to married couples, there are two types of property: marital property and separate property.

MARITAL PROPERTY

Generally, marital property is everything that either of you earned or acquired during your marriage unless you agree otherwise. For example, money you earned at work, put in a joint checking account, and used to pay household bills is marital property. So is the car you bought and made payments on with money from that account.

SEPARATE PROPERTY

Separate property belongs only to one spouse. There are some differences in how separate property is defined in different states, but the same general rules apply. The most common forms of separate property are:

• property one spouse owned before the marriage
• gifts received by one spouse before or during the marriage
• property acquired during the marriage in one spouse’s name and never used for the benefit of the other spouse or the marriage
• inheritances received before or during the marriage
• property that the spouses agree in writing is separate, as long as the writing meets your state’s standards for that type of agreement (called either a transmutation agreement or a post-nuptial agreement)
• property acquired by one spouse using separate property assets with the intention of keeping it separate, and
• certain personal injury awards (in general, the portion of the award that repays you for lost earnings is marital property, while any award for pain and suffering is separate).

TYPES OF MARITAL PROPERTY OWNERSHIP

In addition to learning the difference between marital and separate property, you must also figure out what property ownership system your state uses. Some states follow the common law system, and others the community property system — and the difference determines what gets put into the marital property category.

COMMON LAW STATES

Most states, except those listed as community property states below, use the “common law” system of property ownership. In these states, it’s usually easy to tell which spouse owns what. If only your name is on the deed, or other title paper, it’s yours. If you and your spouse both have your name on the title, you each own a half interest in the property unless the title document says otherwise. If an item doesn’t have a title document, generally you own it if you paid for it or received it as a gift.

COMMUNITY PROPERTY STATES

If you live in a community property state, the rules are more complicated. But in general:

• spouses own equally almost all property either one acquires during the marriage, regardless of whose name the property is in
• half of each spouse’s income is owned by the other spouse during the marriage, and
• debts incurred during marriage are generally debts of the couple.

In community property states, the following is separate property:

• gifts given to one spouse
• property either spouse owned before the marriage and kept separate during the marriage, and
• inheritances.

The community property states are: Alaska (by agreement), Arizona, California, Idaho, Louisiana, Nevada, New Mexico, Texas, Washington, and Wisconsin. (In Alaska, spouses can sign an agreement making specific assets community property.)

Here’s a rundown on what is community and separate property in community property states.

These rules apply no matter whose name is on the title document to a particular piece of property. For example, a married man in a community property state may own a car in only his name — but legally, his wife may own a half-interest. Here are some other examples:

Keep in mind that you can change the character of your marital property ownership before your marriage begins with a written agreement (often called a prenuptial agreement). To learn more about prenups, see the Prenuptial Agreements area of our website.

To learn more about the property ownership rules and whether a prenuptial agreement is right for you, contact Tierney Law Group for a consultation 925-362-3364 or by email at [email protected].