Community Property

Community property is a method for defining the ownership of property acquired during marriage. Community-property laws exist in Arizona, California, Idaho, Louisiana, Nevada, New Mexico, Texas, Washington, and Wisconsin, and in Alaska if you have made a written property agreement.

Generally, in community-property states, all earnings during marriage and all property acquired with those earnings are considered community property, owned equally by husband and wife. Likewise, all debts incurred during marriage are debts of the couple. Property owned before marriage, gifts given to just one spouse, or inherited property are considered to be the separate property of the spouse.

The distinction between community property and separate property becomes important when determining which of your assets are controlled by your will. At the death of one spouse, half of the community property will go to the surviving spouse, unless the decedent's will directs otherwise. Both halves of community property will receive a full step-up in cost basis.  Separate property may be left to whomever the owner wishes.  A married couple can sign a written agreement that makes some or all community property the separate property of one spouse, or vice versa.

Community Property:

  • Money either spouse earns during marriage.
  • Things bought with money either spouse earns during marriage.
  • Separate property that has become so mixed (commingled) with community property that it can't be identified.

Separate Property:

  • Property owned by one spouse before marriage.
  • Property given to just one spouse.
  • Property inherited by just one spouse.

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