States are divided into two types for the purpose of deciding what spouses own, and how their property is divided upon divorce: "community property" states, and "common law" states.
The following states are "community property" states: Arizona, California, Idaho, Nevada, New Mexico, Texas, Washington, and Wisconsin. In addition, Alaska may also be considered a "community property" state, but only if the married couple makes a written agreement. You may notice that most of the "community property" states are located in the western part of the USA. The reason for this is historical - community property was brought to this country by Spanish settlers in that region.
The fundamental community property principal is simple: During your marriage, all property acquired by either your or your spouse is owned in equal half shares by each of you, as community property, except for property received by one spouse as a gift or inheritance.
Anything that isn't community property is considered "separate property" - that is, property owned entirely by one spouse. Examples of such "separate property" include property owned before marriage, and property given as separate property to one spouse by a will or gift.
In community property states, what you own typically consists of all of your separate property and one-half of the property owned as community property with your spouse.
WHAT IS "COMMUNITY PROPERTY"?
The following property is community property:
- All employment income received by either spouse during the course of the marriage.Generally, this refers only to the period when the parties are living together as husband and wife. From the time spouses permanently separate, newly acquired income and property are generally the separate property of the spouse receiving them.
- All property bought with employment income received by either spouse during the marriage (but not with income received after a permanent separation).
- All property which, despite originally being separate property, is transformed into community property under the laws of your state. This transformation can occur in several ways, including when one spouse gives it to the community (the couple)-for example changing the deed of a separately owned home to community property.More commonly, separate property simply gets so mixed together that it's no longer possible to tell it apart. Lawyers all this "commingling."
The one major exception to these rules is that all community property states allowspouses to treat income earned after marriage as separate property if they sign a written agreement to do so and then actually keep it separate, as in separate bank accounts. Most couples don't do this, but it does sometimes happen, as with a prenuptial agreement.
SEPARATE PROPERTY DEFINED
The following are separate property:
Property owned by either spouse before marriage;
- Property one spouse receives after marriage by gift or inheritance; and
- Property that the spouses agree, in a contract, to classify as separate.
These kinds of property remain separate property as long as they aren't mixed (commingled) with community property. As mentioned, if commingling occurs, separate property may turn into community property. Thus, if you wish to ensure that property that you acquired before your marriage remains "separate", you would be well advised to keep that property separate and apart from property that you and your spouse acquire during marriage. With respect to funds, this would mean keeping such separate property in a separate bank account.
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Community property states differ in how they classify certain types of property. One of the biggest differences is how the states treat income generated by separate property during a marriage. In California, Arizona, Nevada, New Mexico, and Washington, any income from separate property during a marriage is also separate property. In Texas, and Idaho, it is considered community property.