Property Division in a Community Property State

By Jennifer Hankinson

Divorce Attorney, Cordell & Cordell

There are two ways to classify property acquired during a marriage: community property or equitable distribution.

In a community property state all property acquired during the marriage is divided equally (50/50).

In an equitable distribution state, all property acquired during the marriage is divided “equitably,” or fairly. Not necessarily equally.

For purposes of this article, we will examine how property is handled in community property states. In another article, we looked at how an equitable distribution state handles property distribution.

Community property consists of the “property, other than separate property, acquired by either spouse during marriage.” There are nine community property states: Arizona, California, Idaho, Louisiana, Nevada, New Mexico, Texas, Washington, Wisconsin. (Learn more about property division if your state is community property or equitable distribution.)

Separate property is defined as the property owned or claimed by the spouse before marriage, the property acquired by the spouse during marriage by gift, devise, or descent, or the recovery for personal injuries sustained by the spouse during marriage, except any recovery for medical expenses and loss of earning capacity during marriage.

In community property states, income from either spouse’s separate property belongs to the community. Additionally, in Texas (where I practice), the separate or community character of an asset is determined at the time the asset is acquired. Thus, if title to an asset is acquired before marriage, it is that spouse’s separate property.

Let’s use an example. Say you had a 401k before marriage that you were contributing to. Is that 401k asset considered community property once you get married?

Assuming that no such funds were added, the pre-marital 401k would be your separate property. However, any income generated from such separate property during the marriage would be community property.

On the other hand, if funds were added to the 401k during marriage than your spouse would have a right to one-half of all funds added to the 401k during the marriage. The community in such a situation would have a right of reimbursement against all funds added to the 401K during marriage.

Furthermore, if separate funds and community funds are “commingled” there is a possibility that the separate property could lose its identity and could result in community property.

In situations where separate property is commingled with community property, the community presumption can be overcome by “tracing.” Tracing is the process of establishing that a particular asset, or a portion of it, is separate property.

For more information please contact a family law attorney in your state. Please be advised that my answering of this question does not constitute an attorney-client relationship.

Cordell & Cordell has men’s divorce lawyers located nationwide.

Note: In another article, we looked at how an equitable distribution state handles property distribution.

 

Jennifer Hankinson is a Staff Attorney in the Dallas, Texas office of Cordell & Cordell, where she practices domestic relations exclusively. Ms. Hankinson is licensed in the state of Texas. Ms. Hankinson received her bachelors’ degrees in both Finance and Political Science from Santa Clara University in Santa Clara, California. She later received her Juris Doctor from Gonzaga University School of Law in Spokane, Washington, where she graduated Cum Laude.