Community Property in Divorce

Community Property in Divorce

Arizona, California, Idaho, Louisiana, Nevada, New Mexico, Texas, Washington, and Wisconsin follow what is known as the “community property” system for marital property. In a pure community property system, property acquired during marriage other than by gift or inheritance from a third party is presumed to be community property and will be divided equally between the parties in divorce. Property that a spouse brings into the marriage or acquires during marriage by gift or inheritance from a third party is presumed to be separate property. Community property states generally consider a gift from one spouse to the other to be the recipient’s separate property.

The concept of community property also applies to debts. A divorcing couple may have community debts, and each spouse may also have separate debts. Generally, for a separate debt, a creditor may look to the debtor spouse’s separate property and his or her interest in the community estate for satisfaction of the debt. In that general case, the creditor may not look to the non-debtor spouse’s separate property or his of her interest in the community estate. Various community property states have made exceptions to that general rule for debts relating to necessities, including debts for necessities that arise after the parties’ separation.

A spouse’s separate property may be treated as community property if the spouse commingles that property with the community estate. For example, if a husband uses an item of his separate property to pay the couple’s community living expenses, that property usually is presumed to become community property. Generally, that presumption may be overcome by tracing the property back to its separate property origin, and by presenting evidence that the spouse did not intend to give her separate property to the community.

Community property states also differ on whether proceeds from separate property remain separate property or become part of the community. “Proceeds” means income or property generated from other property, such as interest on a bank account or a stock dividend paid on stock holdings. In Texas, proceeds that are generated from separate property during marriage and that are held as separate property (not commingled) are presumed to be separate property. In California, proceeds generated from separate property during marriage generally are presumed to be community property.

Copyright 2012 LexisNexis, a division of Reed Elsevier Inc.