Community Property vs. Separate Property 24

What’s Ours? What’s Mine?

One of the most difficult aspects of divorce is deciding who gets what. In the absence of a prenuptial agreement, state laws govern how property and assets are split between the two parties. Depending upon your state’s laws, you may get more or less than you think you deserve.

Property Basics

Property can be divided into two categories: community and separate (sometimes also called “personal property”).

Community property is generally anything that was acquired after marriage. This can include the house you bought, cars, furniture, artwork, collectibles and even income that was earned during the marriage.

Separate property on the other hand, is generally anything that was acquired prior to the marriage. Separate property can also include items or money received as an inheritance (even after the marriage) as well as any property acquired after a legal separation.

Commingling

The problem with allowing the state to distinguish between separate and community property is that the two often become mixed during the marriage, a process known as “commingling.”

Let’s say for example, that you entered into a marriage with a hefty savings account. You then opened a joint checking account with your spouse and transferred some of your separate savings into the new account. Both of you used this account exclusively, making withdrawls and deposits on a regular basis. In the event of a divorce, it would be difficult to distinguish your original savings from the existing balance in the account because you have blended your money with that of your spouse, treating it as community property.

To avoid this situation, you’ll want to take extra care to document any separate property that is used in a community property manner. If the funds from the savings account were used to purchase a particular item for example, the receipts could be used to trace the money back to the separate account. [more about commingling…]

Debts

Like assets and income, debts can also be categorized as separate or community property. A credit card account that was opened jointly during the marriage for example is considered to be community property and both parties are responsible for its repayment.

On the other hand, a debt that was assumed prior to the marriage or after a legal separation would be considered separate property and the account holder bears the responsibility for repayment.

Future Income

In addition to money earned during the marriage, your retirement benefits are also considered to be community property. That means if you’re sitting on an impressive 401(k), your spouse may have the right to a portion of these funds.

This right can often be waived in a prenuptial agreement or provided for in some other fashion. In the event that there’s no prenup, the judge will address the issue in one of two ways: a division of the account or a waiver from the spouse.

If the account is to be divided, it can be done through a buyout or the account can be split into two separate accounts. A buyout is a situation in which the account’s owner pays his/her spouse a certain amount, either through a property trade or cash payment. If the account is to be split, a certain sum will be transferred into a new account in the name of the recipient spouse.

Social security payments and worker’s compensation payments are not considered community property.

“Community Property States”

States that have community property laws treat income during marriage differently than other states. Special rules apply to spousal property and income in the community property states:

You should always consult with an attorney to learn more about how property laws in your state will affect you.

Looking for legal answers?



Discussion

  • Donna Hay

    First is it legal to remove your name off of your coporation (which is partnershiped with brother and father) so that I don’t recieve anything from his business during divorce settlement.
    Second if the business was started as a family-owned business which was pasted down from the grandfather to the father to the sons will i be entitled to any percentage of the business since it was aquired prior to our marriage, but was incorporated during our marriage….help

    • Todd

      You seriously should not be entilted to the business because if was prior to marriage!! GREEEDDDDDDD

    • I hope you have a lawyer. Divorces with businesses involved are often quite complicated. If this was a family business that existed generations before you joined the family, then the question would be how much of the percentage interest owned by your husband was community? In California the courts and the attorney do what is called a Pereira/Van Camp analysis to determine whether and to what extent the value of the business was increased during the marriage and whether the increase in value was due to the unique efforts of the married person or general economic conditions. It’s all very complicated and usually forensic accountants wrangle over the numbers. Many companies and partnerships incorporate at some point and the mere fact of a business being incorporated is not dispositive of the characterization (separate versus community) issue. Hope this helps (and this is general information and not specific legal advice. If you need legal advice consult a family law attorney in your jurisdiction.)

  • The ideas I received from your web-site was fabulous . Thanks .

  • mcoop

    here is my promblem. We are divorced now and went through some of our property, he gives me the house, he takes the farm and all of its debts, as i take the house and vehicle debts,. divorce papers say that he is responsible for all property he recieves including the farms debts and liens, i go to try to sell my house to find out that he has a second lien on it that is through his farm. i was told that nothing can be done that i am stuck, i really don’t like having my house with his lien on it. what if his farm fails they will take my house that my kids and i live in.

  • Akatherine

    Is there a legal document that can
    drafted to keep the previous personal
    debt of two individuals separate for
    marriage? Like a pre-nup, but not for
    money/ income, but for debt. I don’t
    want him responsible for my previous debt &
    i don’t want to be responsible for his. I
    understand that we could not comingle $
    after marriage. Can we also still file taxes
    as individuals?

  • DeMaine!

    The family car is in the wife’s name. When she catches an attitude with me she refuses to allow me to use the car. I have my own set of car keys that was provided upon the purchase of the car. My question is: if I take a ride in the car and she call the cops on me can I be arrested and even jailed although I made payments on the car as well? I need to know, I reckon, is do I have any right to use the car when I wish without the threat of jail? Thank you very much!

    • J

      Depends on the state you live in, but I know in PA that as long as you are on the title and registration you have a right to use the car!

  • We have a “matrimonio con capitulaciones” o (separate property) where any property is kept separate as if either was single. Prior or during marriage earnings are kept separate. Do you have such a thing in USA?

  • Jeremy Atchley

    My ex wife and I had property gifted to us from my side of the family 5 months before we were legaly separated. Is the gift considered mine since my father gave it to me? Is she allowed to have half of it?

  • angela

    I bought my home alone in 2006 and I’m getting ready to refinance for a better APR. I was told by my loan possessor that I would have to add my new husband to the tile at closing. My question to you is does this mean he owns half of the house should the relationship dissolve in a divorce? I got married 6 weeks ago and we live in the sate of Texas. I will be the only one on the mortgage financing.

    • J

      I know that in PA you can have a spouse sign a quitclaim deed and sign off his rights to the property and that way you are safe. I dont know about Texas. You should not have to add him to the title/deed. But in PA it doesnt matter. He would still have rights to the equity in the property. Make sure you keep ALL your paperwork from the first mortgage including any info you have about downpayments and dates of payment transactions!

  • John

    My wife and I separated 6 years ago and have supported her financially since, without getting a legal divorce……3 years ago I partnered with a friend and started a business which has become successful. In a contesed divorce, does she have rights to my share of the business even if she had nothing to do with it even if it was started 3 years after I left the house?

  • rhonda

    I am a diligent saver my husband a big spender. I have saved lots in tax retirement accounts he has saved nothing. He squanders his on dinners out golfing etc. which can be proven by credit card receipts. Will he get half of all I have saved when we divorce?

  • corey

    getting divorced i have a motorcycle and my clothes moved out she has the house wich she owend no mortgage befour the marrage but ive done numorous repairs to and she also has all the things we baught thru out the marrage all i want is the motorcycle now she is fighting me for it and is asking for alamony we were only married for 2 yrs is that long enough for alamony and is the house all hers even tho i put time and money into it

  • mike

    My wife kept her checking account before we got married. We have been married for 13 years. I am now out of work and making the house payment out of my savings and retirement. You see I bought the house 12 years before we were married. But lately I found out that she has given close to $100,000 to her family from her checking account since we were married,. Isn’t that are money she’s giving away. She has help them buy a house, build a house and help send there kids to school.I an confusd. She say’s its her money…..

  • friendly

    The house is in my name but my ex got it in the divorce, now my ex is going through major health problems and doesnt want to lose the house since the kids are with him and he would rather i take the house back so he can move out of state for his treatments, we have 3 children so it would be bad considering im in an apartment, but how do we go about changing this if both parties agree on this, our divorce was final in April 2012 and i dont sign the quit deed over to him for another 12 more months, but just not sure if he’s gonna make it that long, we cant let the house go back to the bank, my kids love this home.

  • John

    My wife and I have been permanently separated for 21 years. She lived in VA and I moved to FL 6 years ago. I bought a house in FL now she claims that half the house and all its contents belong to her. If this house was purchased after we had been separated for 15 years does she have any legal claim.

  • Shahib

    If your married and get into an accident. And you are getting a divorce, is your spouse entitled to your settlement?

  • Pam

    My husband and I bought his brothers out on their mother’s house and used his inheritance plus my own money to purchase property. We are now going through a divorce – We refinance the property also and hold the property as community property with right of survivorship. plus, after purchasing property my husband was fired from his job and I have been paying every thing for 9 years. He is also an alcoholic. That is why I finally left. I need your help am I entitled to 1/2 of the money from the sale of the property? I sold my separate property too to keep us going on payment and used IRA money as well and my own income along with fund from my father. Please respond……Thank you

  • jojo

    I live in Oklahoma. I married my wife 20 years ago and we have no kids. We both worked at air force base and I retired last year at 64. She still works. We both held our jobs over 30 years. We bought a house together 12 years ago with both our names on deed. We each paid half the payment and have separate banks. She claims the house was a gift from me. Help!!!

  • micheal

    My wife was able to get a pfa on me for 6 months, not for physical abuse but for a 5 minute false imprisonment, mostly because my attorney said because she went out window on front porch roof. She came right back in but was on phone with sister, she has sold or given away many of my personal property especially coin collection from my passed away dad. I’m not allowed to speak to her, how do I protect marital property as well as any lasting personal property? Can I keep anyone from entering my home while the 6 months ecpires?

  • micheal

    I brought a camper into marraige, I did upgrade it, her name never on it, and never put a dime into it, for the last 8 years she has not worked, I’ve handled everything, she gets ssi for her eyes, considered legally blind but can c threw special contacts, just cant drive, uses public trans. How much right does she have with camper, basically there is little equity anyway

  • jill

    We bought our home together when we got married 22 yrs ago. My husband thinks because his name is first on the mortgage he will get the house. We live in Utah. Is he right ?