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Community property, common law, assets and debts

Yours, mine or ours: Most couples, whether married, cohabitants or in same-sex unions, never give a thought to who owns what until divorce or death raises the question.

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That's often when a lawyer will introduce the term "community property," a friendly sounding phrase that can have some unexpected consequences.

In America, there are two systems that govern marital property: community property and common law (also called marital property). The community property system, which is derived from Spanish law, is found predominantly in western states: Arizona, California, New Mexico, Nevada, Idaho and Washington, as well as Texas, Wisconsin and Louisiana. In Alaska, couples can opt in for community property. Common law, which is derived from English law, governs the rest of the states and the District of Columbia.

In a community property state, whatever you bring into the marriage or receive individually through gifts or inheritances remains yours, but whatever you earn or acquire during the marriage is co-owned by both parties, regardless of who earned it or whose name is on the title. Of course, if you commingle gift or inheritance cash with a joint account, it very likely will be considered community property by a court.

In a common law state, if your name appears on the ownership document, registration or title, you own it. However, common law holds that your spouse has legal right to claim a fair and equitable portion of your property in divorce; in most cases, two-thirds go to the higher wage earner, one-third to the other spouse.

"Property owned by one party can be awarded to the other if it is considered to be justified under a set of about 15 different circumstances," says Frederick Hertz, an Oakland, Calif., attorney and author of "A Legal Guide for Lesbian and Gay Couples." "Marital property states take all of the assets of both parties, earned and inherited, and distribute them based on equitable grounds: who needs it, what's the length of the marriage, what's fair. There are no preset rules."

Moving violations
To some extent, geography is destiny when it comes to marital property. Unless you sign a prenuptial or postnuptial agreement splitting things differently, the laws of the state in which you reside -- your domicile -- will determine what's yours, mine and ours.

One exception is real estate.

"If someone moves from a community property state to a common law state and has community property such as real estate in their former state, then that real estate would remain under the community property laws of the original state because the real estate stays put," says Denis Clifford, a San Francisco estate planning attorney and co-author of "Plan Your Estate." "The real estate is governed by the laws of the state it's in."

What is your state's marital property law?
 
 
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