By: Minh Luong and Serena Junejo
In the case of death or divorce, a couple’s assets are divided based on the laws of their state. Most states follow equitable distribution law, where property is given to the purchaser or “rightful owner” when a marriage ends. However, in community property states, all property acquired during a marriage is split equally between both parties by default. In these states, it is important for couples to have written acknowledgement defining which items are separate property.
Community property is any property, debt, or income generated during a marriage. It belongs equally to both spouses in community property states.
The three types of community property are:
Community property law is often referred to as the 50/50 split law. In the case of a divorce all property is valued, and each spouse receives a 50/50 split of the valuation, assuming the parties do not settle on another deal. When one spouse dies, most debts and property are transferred to the surviving spouse.
Fewer than 20% of US states have community property laws. These states include California, Arizona, Idaho, Louisiana, Nevada, New Mexico, Texas, Washington, and Wisconsin.
Alaska, South Dakota, Tennessee, Puerto Rico, and Guam allow couples to decide whether they want to use community property laws or equitable distribution laws.
Separate property belongs to one party. In community property states, this includes:
Any prior agreement, such as a pre-nuptial agreement, will always trump common property law. This was famously seen in the 2010 McCourt divorce. Jamie McCourt signed a post-nuptial agreement and later a settlement, stating that the Los Angeles Dodgers belonged to her husband Frank. She attempted to fight the agreement, citing community property laws and that the value of the property changed since she signed the agreements. The judge ruled in Frank’s favor, marking a monumental common property decision.
Couples living in community property states should carefully consider how to categorize their assets. For help dividing property in the case of a divorce, contact one of our experienced family law attorneys.
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