There are two ways to classify how property is owned during a marriage and before divorce. Most states allow each spouse to buy or acquire property in his or her name alone, and the other spouse has no ownership interest in the property. Generally, when there is a divorce in one of these states, the property is divided through equitable distribution - a fair division of property that was acquired during the marriage, regardless of which spouse actually owns it.
A few states follow a different approach: each spouse has an equal and immediate ownership interest in whatever "community property" is acquired during the marriage. When there is a divorce in one of these states, the community property is divided between the parties. These states are:
- New Mexico
In addition, Puerto Rico, which is a territory of the United States, uses the community property theory.
In community property states, there are numerous factors that are used to determine what property is in fact "community property." Also, the different community property states have different rules for how the community property is divided: either "equally," or "equitably" or "fairly."
If you're involved in a divorce, and if you're in a community property area, you need to understand not only the community property laws in your area, but also the decisions from the family or divorce courts in your area that interpret and apply the community property laws.
What Is Community Property?
In a divorce in a community property state, it is critical to determine what is community property and what is "separate property." Community property is all property acquired during marriage by the labor, efforts, or skill of either or both spouses.
Separate property is property that is "owned" by only one spouse, and it usually won't be part of the property division in the divorce. Separate property is usually things like:
- Property that was bought or acquired by one spouse before the marriage
- Property that was inherited by one spouse or was a gift to one spouse, even if the inheritance or gift happened during the marriage
Sometimes, separate property can become community property through "commingling," which is when separate property is mixed together with community property in such a way that you can't tell the difference between the separate and the community property. For example, when one spouse is gifted a sum of money and he or she deposits it into a bank account that is jointly owned by both spouses and the money is used to buy community property, such as home furnishings.
In some states, there is a presumption that property acquired during marriage by either husband or wife or both is community property. In other states, property in the possession of either spouse during the marriage is presumed to be community property, and the spouse who claims that such property is "separate property" has the burden of proving it.
Many community property laws provide that all property acquired "during the marriage" or "after the marriage" is community property. So, usually, all property acquired up to the date of divorce is community property. However, some laws use the date of separation as the cut-off date for determining if certain property is community or separate property.
Dividing the Property
In some community property states, the parties' community property has to be divided "equally." That does not mean that each item of community property has to be divided equally between the spouses so that after divorce each spouse owns one-half of each asset. Rather, the distribution has to be an equal, or nearly equal, division of the total value of the community property.
Most community property states, however, allow the court to make an "equitable" division of community property, that is, a property distribution that is "fair" to both spouses. In these states, the courts will consider various factors when making the division, such as each spouse's current income and future earning capacity. Some, but not all, will consider a spouse's fault in causing the divorce or misconduct or fraud in dealing with the parties property or assets during the marriage.
What about separate property? Some community property laws do not allow an equitable distribution of separate property, while some laws do allow it.
You need to carefully read the community property laws in your area to determine if an "equal" or an "equitable" distribution will be made in your case, and if your separate property can be included in the property distribution.
Questions For Your Attorney
- Just before we got married, my wife's father gave her some money, which we used as part of our down-payment for our house. I provided the other part of the down-payment, which was much larger. How will the house be divided when we get divorced.
- What kind of records do I need to prove that some property that my spouse claims is community property is really my separate property?