Community property is a family law term used to refer to all of the personal and real property that a couple acquires during their marriage, which legally belongs to both spouses. If the couple divorces, the community property must be divided and distributed to the parties. The goal in most cases is to achieve an equitable division of the community property, as well as the community debt. The court assumes that when two people marry, they are making an implied agreement to share the belongings they acquire during the marriage equally. To explore this concept, consider the following community property definition.
Definition of Community Property
- Everything purchased or acquired by a couple during the course of their marriage or domestic partnership that is not a gift or inheritance.
What is Community Property
When two people get married, they share more than their hearts. They share their property, their belongings, their income, and their debt. Understanding who owns what can be confusing, as some states look at community property differently than others. Determining what is community property, also referred to as “marital property,” becomes important during significant life events, such as creating a will and other estate planning documents, divorce, and death.
Community Property States
The majority of U.S. states do not have community property laws. During divorce in these states, the division of the assets often becomes the responsibility of the family court judge, who distributes the property how he or she sees fit.
Community property states include:
- New Mexico
Even in states that have community property laws, a judge quite a bit of discretion in distributing the marital assets in a manner he or she sees fit. For example, if one party is mainly responsible for the care of the children after a divorce, the judge may award him or her a greater portion of the home furnishings.
Types of Community Property
Typically, any property that is acquired during the marriage is considered community property in a community property state. The most common examples of community property include items acquired during the marriage, such as:
- Wages earned by either spouse during the marriage, especially if it is deposited in a joint account
- Home and furniture
- Computers and other electronics
- Personal belongings
- Cookware and kitchen items
- Decorations and art
- Yard care tools
- Vehicles purchased during the marriage
Separate property refers to personal and real property that belonged to one spouse prior to the marriage, as well as property given to one spouse as a gift or inheritance. Other items that may be considered separate property in some states include:
- Property inherited by one spouse
- Bank account held in the name of one spouse
- Proceeds from a personal injury suit
- Property gifted to just one spouse, even if it took place during the course of the marriage
- Any property specifically listed in writing
- Property purchased with assets that were kept separate during the course of the marriage
Even when states recognize separate property laws, the spouse that claims the property often has the burden of proving that it should be considered separate and community property.
Property is not the only thing acquired by couples during the time they are married. Debt acquired by the couple, or by one spouse for a property of purpose that benefits the couple, is considered community debt. Like the couple’s assets, community debt is divided and distributed between the spouses upon divorce. Community debt is also an issue in settling the estate when a spouse dies. If such debt has not been provided for in a will, whoever inherits the assets of the estate may have to settle the debts as well. This is a complex issue on which a professional should be consulted.
Debt owned by one spouse prior to the marriage remains the separate debt of that party. In addition, if one spouse negligently wastes assets, or incurs debt, for example by gambling, the court may consider the debt as the sole responsibility of that spouse in a divorce.
When the Type of Property is Important
There are several circumstances in life that can bring up the question of who owns marital assets. These include death and divorce. Sometimes, when couples divorce, they can come to an agreement about who gets what, but in many cases, high emotions make the matter difficult, and the case goes before a judge. The judge will then look at all of the marital assets, decide whether any of the property is separately owned by one spouse, and divide the rest between them.
In the event of the intestate death of one spouse, the issue of separate and community property again raises its head. Without a will, all of the couple’s community property remains with the surviving spouse. The deceased spouse’s separate property would go to the deceased’s closest living relative, often a child or grandchild.
Related Legal Terms and Issues
- Personal Property – Any item that is moveable and not fixed to real property.
- Real Property – Land and property attached or fixed directly to the land, including buildings and structures.
- Equitable – Impartial, unbiased, fair to all parties.
- Estate Planning – The process of arranging for the transfer of an individual’s assets upon death.
- Will – A legal document in which an individual specifies how his or her estate will be managed and distributed after death.
- Intestate – The state of having died without having a will.
- Marital Assets – All property acquired during the course of a marriage, regardless of which spouse claims ownership or holds title to the property.
- Community Debt – Any debt incurred during the course of a marriage for some purpose that generally benefits the marriage, and for which both spouses may be held liable.