Community property is a type of joint ownership of assets between married couples. The law states that a couple owns all assets equally if they were purchased during their marriage. This article talks about all ins and outs of community property.
What Community Property SAYS?
Community property is the law in nine states: Arizona, California, Idaho, Louisiana, Nevada, New Mexico, Texas, Washington, and Wisconsin. Married couples can elect to have some or all of their property treated as community property in Alaska, Tennessee, and South Dakota. They have to state so in a written contract. However, this type of ownership is not mandatory as it is in the other states.
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How Community Property Works
In states where this law is accepted, the assets are jointly owned. Regardless of the title of the asset.
Gifts and inheritances are an exception. If someone gives something to his spouse, that property belongs to him alone. If a spouse inherits an asset, it is his only. Also, those assets are excluded which are owned or acquired before marriage.
If John owned a home before he married Mary, she isn’t considered an equal owner of that property. The reason behind it is because its acquisition took place before marriage unless it becomes transmuted. That can only happen if community money earned during the marriage is used to maintain the asset. Such as to make repairs or to pay insurance premiums.
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Types of Community Property
Let’s look at other types of property:
Earnings, Income, and Wages
In community property states, John would own half of Mary’s earnings, income, and wages and vice versa.
Debts
Debts fall under the umbrella of community property, too. Both partners equally owe the debt. Regardless of which one incurred the debts.
For instance, If John runs up a $10,000 credit card bill in his own name and fails to make the payments. Then the lender can pursue Mary for the money. Even to the extent of garnishing her ages.
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Community Property and Divorce
When a couple divorces in a property state. Then each spouse is generally entitled to half of their property. Likewise, each spouse would be responsible for an equal share of all marital debts.
But divorce laws can vary somewhat among the property states, so consult with an attorney who practices in your state if you want to know the state’s rules.
For example, a prenuptial agreement can override the property law in California. If both spouses get agreed to a non-property arrangement in writing and their agreement get qualifies for a prenup. Then, their property and debts would be divided according to the agreement, not according to the law.
SUMMARY
Like most laws, community property has its critics and defenders. How people perceive it often hinges on where they’re standing. But whether you see the property as a savior or a hindrance, being informed is the best defense.