We previously examined property ownership in common law states. Ownership of property under common law is different than community property. Common law provides for separate ownership of property; whereas, community property is a form of joint ownership for property.

How is it Created?

There is no specific registration or filing requirement to take title to property as community property. All property is community property presumed to be community property if the property is acquired during marriage.

A spouse may be able to overcome the presumption by showing that the property was separate property. Separate property is property acquired before or after marriage and property received during marriage from a third person via a gift, bequest, or devise. Appreciation on separate property that occurs during the marriage and property acquired in exchange for separate property is deemed to be separate property.

Types of Property Included

There are several types of property that are difficult to classify as community or separate property. For example, personal injury recoveries may be community or separate property. Personal injury recoveries for damage caused during the marriage are generally community property; whereas, personal injury recoveries for damage caused prior to or after the marriage are generally separate property of the injured spouse.

Similarly, vested and unvested retirement plans earned during the marriage are community property even if they are not paid out until long after the marriage has ended. Disability pay and workers compensation are community property if they are to replace wages that would have been earned during marriage. Increases in the value of a business are deemed to be community property if the increase occurred during the marriage.

Property can only become community property if it was acquired by spouses when they lived in a community property state. There are nine community property states. These state include California, Texas, New Mexico, Arizona, Nevada Louisiana, Washington, Idaho, and Wisconsin (Alaska has an elective community property system).

Once property is owned as community property the characterization as community property will continue even if the spouses or property move out of the community property state.

Separate property acquired while the decedent resided outside of a community property estate is considered quasi-community property if (1) the property would have been community property had the spouses resided in a community property state at the time the property was acquired and (2) the spouses die or divorce while they later reside in a community property state. Quasi community property is treated as community property by the community property state.

Why is Community Property Important?

Once property is community property each spouse will own an undivided one half interest in the property. Spouses can agree to change the character of community property. Premarital or antenuptial agreements are recognized by most community property states. Generally, premarital agreements must be in writing, they must not be unconscionable, each party must fully disclose the extent of their property, and the agreements must be executed in good faith. These agreements can include language to transmute community property into separate property. This converts community property to separate property.

Alternatives to Community Property

Spouses in community property states may also acquire title to property either as joint tenants or tenants in common in lieu of community property. Joint tenants each own an undivided one-half interest in the property. The surviving joint tenant spouse automatically becomes the owner of both halves of the property upon the death of the first spouse. Tenants in common own an equal proportional interest in the property. The surviving tenant in common spouse does not automatically become the owner of the other half of the property upon the death of the first spouse.

Community, separate, joint tenant, and tenant in common property dictates whether and how a spouse can transfer or encumber the property. Spouses can generally transfer or encumber separate and their share of tenant in common property. Neither spouse can typically transfer community or joint tenant property.

Community property laws and legal issues can be very complicated. The community property laws vary widely by state.

Having examined common law and community property laws, we can now address other implications of marriage. Specifically, we can address the spouse’s obligation of support.