Did you know that the state that you and your spouse reside in when you get divorced has a great deal to do with how your property is divided when you divorce? States follow one of two divorce law models: either community property or equitable distribution. Most states follow the equitable distribution model. The community property model, though practiced in only a small number of states, is radically different from equitable distribution. To learn more about this "community-based" form of divorce law, read on.
Community Property States
At this time, Arizona, California, Idaho, Louisiana, Nevada, New Mexico, Texas, Washington and Wisconsin follow community property divorce laws. Alaska is somewhat of a wild card, with divorcing spouses there being allowed to choose from either community property or equitable distribution laws when splitting up.
What Does Community Property Mean?
Simply put, all assets and debts of the marriage, (with some exceptions shown below) are considered jointly owned by the couple, which constitutes the "community" in community property. Jointly owned, in this case, usually means 50/50 ownership of all debt and property, regardless of which spouse's name is on the debt or asset.
The Property of Community Property
No matter how long you've been married, there will likely be property. While many divorcing couples just assume that common sense will be applied to property division, divorce laws about property division mean that it may not be that simple. Just for clarity, property refers to real estate (the family home, vacation homes, rental properties that produce income, etc), vehicles, pets (yes, pets are considered property), funds in bank, savings, retirement and investments accounts, and more. Community property is concerned with property that falls into the marital property bucket, however, because some of the couple's assets are considered exempt from inclusion.
In most cases, the following types of property is not included in the list of marital property that must be divided:
- Property owned before the marriage.
- Property purchased with funds or by the sale of property owned prior to marriage.
- Property given as a gift to one spouse only before or during the marriage.
- Property inherited before or during the marriage.
- Funds that were awarded to one party as a result of lawsuit.
A word about commingling is called for, since this legal concept can be used to nullify one of the exceptions shown above. When you mix assets, you have commingled. You can "soil" the purity of an asset by mixing it with other assets, and commingled assets usually present headaches for divorcing couples and can cause a contentious divorce. For example, if one spouse came into the marriage with a trust fund and deposited some of that fund in a joint savings account that was later used to purchase a home, you have commingled property.
To learn more about property in community property states, talk with a divorce lawyer like the professionals at Novenstern Fabriani & Gaudio, LLP