Define: Community-Property State

In a community-property state, any property acquired during a marriage is considered jointly owned by both spouses, regardless of who purchased it or whose name is on the title.

The community-property states in the United States are Arizona, California, Idaho, Louisiana, Nevada, New Mexico, Texas, Washington, and Wisconsin.

In a community-property state, marital assets and debts are typically divided equally between spouses during a divorce. This means that both spouses have an equal claim to the property acquired during the marriage.

While the general rule is equal division, there may be exceptions based on factors such as the length of the marriage, the earning capacity of each spouse, and the contributions made by each spouse to the acquisition of the property.

Separate property, which includes assets acquired before the marriage or through inheritance or gifts, generally remains the sole property of the spouse who acquired it and is not subject to division during a divorce.

In some cases, community property can be converted into separate property through a legal agreement such as a postnuptial agreement or a transmutation agreement. However, specific requirements must be met for such conversions to be valid.

In a community-property state, when one spouse dies, their share of the community property generally passes to the surviving spouse. However, certain assets may be exempt from this rule, such as those held in a trust or designated as separate property in a valid agreement.

Generally, community property cannot be sold or transferred without the consent of both spouses. Both spouses have an equal ownership interest in community property and must agree to any transactions involving it.

Community property can have tax implications, especially in terms of income tax and estate tax. It is advisable to consult with a tax professional to understand the specific tax consequences of community property in your state.

If one spouse hides or dissipates community property during a divorce, it can be considered a breach of fiduciary duty. The court may impose penalties on the offending spouse and may also adjust the division of assets to compensate the other spouse for any losses.