Divorce, Community Property, And The Marital Estate

If you live in one of the 9 states that use a community approach to the division of assets and debts in divorce, then the way the courts deal with divorce issues differs quite a bit from the way those issues are handled in the other states, which are known as equitable distribution states. For a quick and easy to use guide on how property and debt is treated in community property states, read on.

Marital Assets

When it comes time to divide up the marital property, almost everything the couple owns is fair game for equal division under the law. While there are exceptions (see below), most all real estate, vehicles, bank accounts, pets, jewelry, art, and more that was purchased during the marriage is considered community property, no matter who actually purchased the asset or who's money was used to purchase the asset. A major benefit of community property laws is the opportunity to level the playing field for stay-at-home spouses who may have given up their careers or education plans to stay home and care for the children of the marriage.

The following two exceptions to the community property provisions should be noted:

1. All property and income owned by one party prior to the marriage belongs to that party and is not considered community property. For example, a savings account held prior to marriage would only become community property if the other spouse contributed to it; any money added after the date of the marriage is subject to community property laws. The funds in the account at the time of the marriage is not subject to those laws. Property that is commingled must be traced back to determine the source of the funds and when the funds were used. As you might imagine, commingled funds can create quite a headache in community property divorces.

2. All inheritances are considered the property of the beneficiary, regardless of whether the party was married or not at the time of bequest. Gifts given to only one party are also exempt from community property divisions.

Marital Debt

Community property states treat the martial debts somewhat similarly to the martial property. Debts acquired prior to marriage are exempt from consideration, but any debt acquired after the date of the marriage is community debt and thus owned by the "community," or the couple. The name on the account or whether the debt is joint or single is not a factor, it is all martial debt to the court system when divorcing in a community property state. It should be noted that at least one community property state does consider the details of the debt to determine ownership, such as who incurred the debt, when it was taken out, and the reason for the debt.

To learn more about community property debt and property distribution, contact a divorce attorney like those found at Hensley Law Team today.