Community Property Laws: Yours, Mine, and Ours

The question of asset ownership can be contentious in the event of a divorce, but even in the happiest marriage it may be helpful to understand the laws regarding ownership of property obtained before and during the marriage.

Currently, nine states have community property laws: Arizona, California, Idaho, Louisiana, New Mexico, Nevada, Texas, Washington, and Wisconsin. (Alaska allows a married couple to opt for community property status.) In these states, all property earned or acquired by either spouse during their marriage is owned in equal shares by each spouse.

IMAGE

In other states, ownership is determined by “equitable distribution” laws, which means that property is divided fairly though not necessarily equally, typically by a judge if the couple cannot agree. If you have more than one home, the laws that affect your property ownership will depend on the state where you are officially “domiciled” according to IRS rules.

If you are domiciled in a community property state, identifying community property and income can be important when filing separate tax returns. Depending on the state, income derived from separate property may be community or separate. The IRS generally considers the following as separate property. (Reference to “marriage” in this list also refers to a registered domestic partnership.)

  • Property owned separately before marriage
  • Money earned while domiciled in a non–community property state
  • Property received separately as a gift or inheritance during marriage
  • Property bought with separate funds, or acquired in exchange for separate property, during marriage
  • Property converted from community property to separate property through an agreement valid under state law
  • The proportion of property bought with separate funds, if part was bought with community funds and part with separate funds

For estate planning purposes, there are no restrictions on how each spouse can give away his or her half of the community property, and a spouse is not required to leave his or her half to the surviving spouse, though many people do. Be sure to consult a legal or estate planning professional familiar with the laws of your state before taking action regarding taxes or property distribution.

 
24500 Center Ridge Road, Ste 310 Westlake, OH 44145
Phone: (440) 353-9700
Branch (440) 617-6427
Fax: (440) 328-4573

Securities and advisory services offered through Cetera Advisor Networks LLC, member FINRA, SIPC. Cetera is under separate ownership from any other named entity.

This site is published for residents of the United States only. Registered Representatives of Cetera Advisor Networks LLC may only conduct business with residents of the states and/or jurisdictions in which they are properly registered. Not all of the products and services referenced on this site may be available in every state and through every representative listed. For additional information please contact the representative(s) listed on the site, visit the Cetera Advisor Networks LLC site at www.ceteraadvisornetworks.com

 

Securities and advisory services offered through Cetera Advisor Networks LLC, member FINRA/SIPC.  Cetera is under separate ownership from any other named entity.

Cetera Advisor Networks Privacy Policy

Important Information About Investing

Cetera Advisor Networks Business Continuity Plan Summary

 

[ Online Privacy Policy | Important Disclosures | Business Continuity | Privacy Promise | Order Routing Disclosure | www.ceteraadvisornetworks.com ]