A divorce requires separating the assets that the couple acquired while married.
Especially if spouses do not have a prenuptial agreement, they may need to navigate rules surrounding community property. Here’s what to know about this legal term.
[Related:How to Navigate the Legal Hurdles of Gray Divorce]
What Is Community Property?
Community property is anything that’s acquired during the marriage with a few exceptions, says Karon Rowden, director of the Family and Veterans Advocacy Clinic at Texas A&M University School of Law.
Questions about community property can surface during a separation and divorce. That’s because issues surrounding this topic can include which partner gets to use what and whether someone can buy something without getting permission. In states with community property laws, most assets acquired during marriage are owned equally by both partners and split upon divorce.
People should assess their state laws, which vary, and ensure they have a valid marriage, Rowden says.
“A lot of people forget to even analyze that step,” she says. “Sometimes, people find out there’s another marriage that you didn’t know about.”
[Related:What Is Collaborative Divorce?]
What Are Exceptions to Community Property Law?
Not all states recognize community property law. But all states have rules about marital property.
Right now, the states that do recognize community property are Arizona, California, Idaho, Louisiana, Nevada, New Mexico, Texas, Washington and Wisconsin, says Scott Altman, professor of family law, including the topic of community property, at the University of Southern California’s Gould School of Law.
In these states, Altman says, what is most distinctive about community property is how this question is answered: Who owns assets during an ongoing marriage?
“In California and these other community property states, the answer to that question is: If it was acquired during the marriage, other than by gift or inheritance, it belongs equally to both spouses,” Altman says.
In the other 41 states, plus the District of Columbia, during an ongoing marriage, property belongs to the person who earned it.
[Read: Cost Breakdown of a Divorce.]
What Are Misconceptions About Community Property?
One misconception about community property is that if you divert your income to a separate account from your spouse’s, it will not become community property.
“That’s just not true,” Altman says. “If you earn it during the marriage and you don’t have a prenuptial agreement, the property belongs equally.”
Another misunderstanding concerns premarital property. Premarital assets and gifts are your property, but if you put them in the same fund without good recordkeeping, it can be presumed community property, Altman cautions.
“A failure of careful recordkeeping often leads assets that were your separate property to be treated as community property, because you didn’t segregate them,” Altman says.
Also, people assume everything is split equally in half.
“That is a big misconception,” Rowden says.
“Everybody thinks community property, everybody thinks 50/50. It’s not. It’s equitable,” Rowden says.
Rowden adds that other exceptions exist. For example, if you were in an accident, a personal injury award would be your separate property.
“One of the best things people can do is educate themselves on what all of their marital property actually is and what separate property the other person has,” Rowden says.
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What Is Community Property? originally appeared on usnews.com
