In addition, Puerto Rico operates under a community property doctrine and Alaska allows couples to choose to designate specific items as community property.
So, what does all this mean when you divorce? Does “community property” mean a 50/50 split?
In general terms, yes. During the property distribution process in a community property state, the court will attempt to divide the property as equally as possible between the two parties. This distribution is usually done using monetary values so that if the divorcing couple came in with $100,000 in assets, each should leave with approximately 50% or $50,000.
Of course, splitting up the assets isn’t always easy since they often include the family home, retirement accounts, art collections and other items that can’t just be split down the middle.
In this case, the court typically has a few options: the items can be sold or cashed in and the proceeds split between the parties; the items can be awarded in whole to one party with something of near equal value going to the other (Mary gets the family home and John gets the art collection and retirement account); or the parties can agree to an unequal split to preserve the items in question.
There are however, a number of variations to these rules since no two community property states work the same. Some states for example, require that all property be split right down the middle while others leave the split to the discretion of the court which can result in an uneven distribution of property.
In addition, while most states treat income from separate property as separate, Idaho, Louisiana, Texas and Wisconsin do not. In these states, any income from separate property would be considered as community property and subject to the normal property distribution laws of your state.
But perhaps the most difficult task in property distribution is determining where separate property ends and community property begins. Its not uncommon for couples to convert or invest separate property into community property at some point during the marriage. This can occur for a number of reasons, including everything from buying a new home to paying off community debt.
Again, handling such property will depend upon the laws of your state but as a general rule, the more commingled the funds, the harder it will be to distinguish separate property from community property.