Community vs. Separate Property
You’ve said I do and now you have his and her towels, maybe even his and her closets, but what about the rest of it? What must you share, what is your own? First, it depends on where you live: in a community property state, or in an equitable distribution state. Knowing the laws of your state can be helpful, before (prenuptial agreement), during (estate planning), or after a marriage (divorce).
How is property and income ownership in a marriage determined? Marital property is generally considered everything that a couple earns or acquires during their marriage—unless you have agreed upon and stated differently, as in a prenuptial agreement. Separate property can be defined in a different way state by state, but there are general rules that apply. If before their marriage:
- one spouse owned property, inherited property, or received a gift that is never commingled with marital property;
- one spouse acquires property during the marriage in their name only and it is never used for the benefit of the other spouse or marriage;
- property is separate as agreed upon in writing, meeting state standards for the mutual agreement (transmutation agreement or a postnuptial agreement);
- property acquired by using separate property assets with the intention of keeping it separate; and,
- personal injury awards: an award that pays for lost earnings can be considered marital property, while awards for pain and suffering can be considered separate property.
There are also two types of marital property ownership systems used by states. Most states use the common law system to determine property ownership. If your name is on the deed, registration, or some form of title paper, it’s yours. If both names are listed, you each own half interest in the property. The nine community property states, Arizona, California, Idaho, Louisiana, Nevada, New Mexico, Texas, Washington, and Wisconsin, consider property—regardless of whose name it is in—to be owned equally. Income is marital income and debts are marital debts. In general, these states consider
Income is marital income and debts are marital debts. In general, these states consider separate property to be: gifts given to one spouse; property owned by one spouse before the marriage; and any inheritances one spouse receives, most likely with the caveat that it is kept separate during the marriage. In the state of Alaska, both parties can agree to community property ownership through a community property agreement or a community property trust, otherwise it is considered separate property.