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| Community property, common law, assets and debts |
| By Jay MacDonald • Bankrate.com |
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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.
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."
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