What are community property laws?
Community property laws are used by courts in nine states to divide a couple's assets at the time of divorce. Arizona, California, Idaho, Louisiana, Nevada, New Mexico, Texas, Washington and Wisconsin all follow community property laws.
If my spouse and I agree on how we should divide our property, do we have to follow community property laws?
No. Divorcing couples are free to negotiate pre-nuptial, marital and settlement agreements to distribute their property. If a couple is unable to reach an agreement, however, the court will use the principles of community property to divide the estate.
What is community property?
When making a division of property, a court will distinguish between community property and separate property. Community property is all property acquired by either party during marriage. Separate property, on the other hand, is all property acquired before and after marriage, as well as any property acquired during marriage by gift, bequest, devise or descent. Thus, if a spouse inherits an antique car during the marriage, the car remains the inheriting spouse's separate property.
How is community property divided?
A court will typically divide community property equally (50/50). This does not require that each asset be divided in half. Rather, the net value of assets received by each spouse must be equal. If the court feels that it is in the best interests of the parties to award an entire asset to one spouse, the court will equalize the distribution by awarding the other spouse assets of equal value. If it is impossible for the court to award assets of equal value, the court may order one spouse to make equalizing payments to the other spouse.
My spouse was the primary breadwinner in our family. Am I still entitled to half of our community property?
Yes. Community property jurisdictions view marriage as an economic partnership. Property acquired during the marriage belongs to the community, regardless of who acquired it.
What is quasi-community property?
Quasi-community property is all property acquired by a couple during marriage in a non-community property state. Quasi-community property is subject to the same equal division rules as community property.
How and when does a court value community property?
Most courts value community property by looking to its fair market value. Fair market value of an asset is determined at a time as near as practicable to the date of trial.
How is separate property divided?
A court may not divide separate property. Thus, a spouse's separate property remains his or her separate property at the time of dissolution.
How will a court divide assets that were paid for with both separate and community property?
If parties provide adequate documentation, most courts will trace the origin of funds used to purchase an asset. For example, if a spouse can prove that separate property was used to make a down-payment on a family home, the court may require that the spouse be reimbursed for his or her separate property payment.
Are damage awards or settlements considered community property?
A damage award or settlement is community property to the extent that it compensates a spouse for lost wages or damage to personal property. Money awarded for pain and suffering, however, is considered the injured spouse's separate property.
Is a retirement or pension fund considered community property?
A court will consider a retirement or pension fund to be community property to the extent that the couple contributed to the fund during marriage. A spouse is entitled to his or her portion of the fund on the date the fund vests, regardless of whether the working spouse chooses to retire at that time.
Are stock options considered community property?
Yes. A court will consider stock options as community property to the extent the couple acquired them during marriage.