Introduction
Want to learn what is community property? Here is the article. Community property is strictly divided in half in some states like California, with each spouse receiving an equal share of the marital estate. To be fair to both parties, a court in some states, such as Texas, may opt to split the marital property in any currency they see fit. One spouse's gifts and inheritance are not considered community property. Marriage-related debts are considered part of the community property. An IRA owned by either spouse during a marriage is treated as joint property. If the retirement account owner lives in a community or marital property state, only their spouse can be the primary beneficiary of any investments held in the account.
Community property laws were established to protect married couples' financial and legal interests. Its origins can be traced back to Spanish law, a branch of civil law derived from the Visigothic Code and Roman law. It recognizes that each partner brings something unique to the marriage and gives equal weight to the economic contributions of both partners. Community property, for example, acknowledges the equal contribution of a breadwinner who provides for the family and a homemaker who cares for the children and manages the household by granting each spouse a share of the marital property even if the homemaking spouse did not bring any money or other assets into the marriage. This is because community property awards each spouse a share of the marital property regardless of whether or not the homemaking spouse brought any money or other assets into the marriage.
What is Community Property?
In states that recognize community property, partners in a married relationship have equal ownership of all marital property, regardless of the legal designation of ownership on any given item. However, gifts and heirlooms are not common goods and belong only to one spouse. If one spouse receives a gift or inheritance, regardless of whether they are divorced, that person is the sole owner of that asset.
Assets:
Each spouse came into the marriage with their own set of assets. These do not become community property. For instance, if John had a home before they married and then Mary bought the same house, Mary would not be considered an equal homeowner.
A piece of property can, however, become shared property. Property transmutation occurs when marital finances are utilized to maintain an asset through repair or insurance premium payment.
Income:
Money is necessary, too. Take the hypothetical case of John and Mary's divorce. They are financially secure because they both work. After their wedding day, they would equally divide all future earnings.
Debts:
Common property includes obligations as well. As a matter of state law, both partners of a married couple are jointly and severally accountable for any obligations committed by either. For example, suppose John racked up a $10,000 credit card bill in his name and failed to make the payments during the marriage. In that case, the lender may potentially go after Mary for the money during the marriage and could potentially lay claim to at least half of the money after a divorce.
Taxes:
The laws regulating common property may affect income taxes paid to the federal government. If a married couple files separate tax returns, each partner is responsible for paying income tax on half of the couple's joint income. For example, if Mary made $75,000 and John made $25,000, and they chose to file separately, they would each be subject to federal taxes on $50,000 of income. Property taxes paid to the federal government would also fall under the purview of the individual taxpayer.
End-of-life issues and common property:
Where community property is the norm, the partition of property upon the death of a spouse is subject to the same rules that apply during a divorce. If the couple had not made a will, their assets would be distributed according to the state's intestacy laws. Standard property states have atypical legal systems.
For example, if a couple has children together and dies in Texas, the other automatically becomes the sole owner of the couple's shared assets. But if the deceased spouse had children from a previous marriage, those children would get half the communal property. The surviving husband would receive only half the estate.
Conclusion:
Nine states and two territories have some version of community property law, which allows for joint ownership of property. Premarital property is not considered. Any inheritances or gifts acquired during the marriage are also considered separate property. The revenue and debt from a shared asset are considered equally held in a community property state. If prenuptial agreements exist, state community property laws will be null and void.
