Community Property Divorce - The Basics
We have two different types of Family Law in our country, “Community Property and Equitable Distribution.” These laws provide the basis for which financial settlements in divorce cases are settled, or ordered, so it is important to understand how the specific state law applies to the facts in your case.
What States follow the Principles of Community Property?
Only nine states: Louisiana, Arizona, California, Texas, Washington, Idaho, Nevada, New Mexico, and Wisconsin.
What is Community Property Law?
In Community Property states, marital property is divided into “two separate, undivided one-half interests.” Most people think of this as everything is split 50/50, but is it really that simple? Well, yes and no. So let’s first explore a few basic concepts. (This applies only to assets and debts. Spousal Support, or Alimony/Maintenance, and Child Support is handled differently and will be discussed in a separate article.)
What is Marital Property?
All of the assets and debts accrued over the life of the marriage are considered marital property. This includes everything from the earned income deposited into checking accounts, to the car purchased together with that earned income, to the credit card debt that was acquired while on vacation. Those marital -- or “community property” -- assets and debt will be split 50/50. This seems simple enough, but it gets more complicated.
Valuation of Marital Assets
Before a marital asset can be distributed, spouses must agree on the value of the asset. Often that means procuring real estate appraisals, business valuations, art appraisals, investment data, etc. If spouses don’t agree, or don’t have the data sufficient to identify value, the process to procure values can be time consuming and expensive.
What is Separate Property?
Separate Property is defined as any asset, such as real estate, vehicles, artwork, retirement accounts, cash, etc., that was owned by one spouse before the date of marriage, as well as all gifts and inheritances received during the dates of marriage. Separate property can also apply to a debt such as a student loan or credit card debt that was acquired prior to the date of marriage.
What is a Separate Property or Community Property Claim?
There are many situations where a spouse might have a separate property claim on an asset. For example, if there was a contribution to an asset from separate property funds, such as the down payment amount for a house, then that might constitute a separate property claim on that down payment amount, without an increase of value. Or, if a spouse has a separate property asset, such as a house that he/she owned prior to marriage, and then during the marriage, marital funds were used to pay down the mortgage, then the other spouse has a community property claim on that asset.
Why are Separate Property Claims Complicated?
Changing Character of Separate Property
Often a separate property asset can transition to a marital asset if it was treated as such during the marriage. For example, if a spouse deposits an inheritance or gift into a joint account, that co-mingling of assets can affect the character of the asset and in some cases that inheritance or gift would no longer be classified as separate property.
Burden of Proof
The spouse who claims an asset as separate property has the burden to prove it. Without an agreement between the spouses or sufficient documentation, often the claim will not be upheld by the court.
Getting Started with Divorce in a Community Property Law State
To sum it all up, Community Property settlements are guided by the 50/50 rule, but as we all know, the factors the court considers when determining that 50/50 split is subject to interpretation. This is where identifying and detailing the background and financial facts in your case, and obtaining legal advice about your county laws, is so important.
Understanding how your court would likely rule -- based on the facts of your case --can help you create a strategy that minimizes the amount of time, expense, and emotion you need to invest into achieving a creative settlement in mediation, the collaborative process, or between attorneys. (Remember, in most cases, a settlement means that you and your spouse agreed to terms that you both can live with as opposed to having those terms forced upon you by the court.)
The case profile and financial tools we have designed at dtour.life will help you to document your marital and financial information in a way that will more efficiently enable a lawyer to give you specific legal advice based on all the facts in your case.
Are you thinking about or ready to begin your divorce?
The dtour.life platform helps you prepare for and manage this complicated journey. Our tools deconstruct the divorce process so that you can better understand what is required and more easily organize the family & financial facts and reports that will be needed. With secure digital collaboration, you have more control and can far more easily update and manage the data along the way – with your professionals, with your spouse, or both. Never hesitate to contact us with any questions no matter how small or how big. [email protected]. We’ve got you. You’ve got this.
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