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Rocket Lawyer Family law

Popping the Question? You Need Community Property 101

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It’s the holiday season and love is in the air! Christmas Eve is one of the most popular dates to get engaged. If you’re planning on getting married in the new year, you may want to familiarize yourself with the legal concept of Community Property before becoming one with your soulmate – spiritually and financially.

No, community property isn’t some left-coast non-recognition of property rights, but rather a system where married couples have joint ownership of almost everything they acquire during the course of their marriage. Currently nine states make community property the default laws of the land in their jurisdictions: Washington, California, Nevada, Idaho, Arizona, New Mexico, Texas, Louisiana and Wisconsin. Alaska allows couples to follow community property, but it is not the default in the state.

Not all property acquired is subject to community property; most states will exempt property owned before marriage, unless it is “commingled” (that’s legalese for “mixed”) with marital property. For example, if one spouse has a trust fund that is separate property from their spouse, but then the payments of the trust fund, along with the wages of the other spouse, are put into a joint bank account, and that account is used to purchase property, that property would likely be considered entirely community property, even though some separate property funds were used to purchase it.

There are some types of property that are obtained during the marriage that aren’t considered to be community property. However, these can be subject to commingling laws if they are used to buy community property items. For the sake of simplicity, we’ll stick to the most common forms of separate property types. They include:

  • Miss Independent: Separate property or items purchased using separate property from before the marriage that is never transferred into community property or commingled.
  • Hands Off My Presents: Gifts given to one spouse, and only one spouse, before or during the marriage.
  • Trust Fund Baby: Inheritance.
  • Damages: The money awarded from some types of lawsuit, such as personal injury lawsuits.

There’s a catch: Assets are community property, but unfortunately, most types of debts are too. Credit cards, mortgages, car payments, and personal business debts are all frequently shared between spouses in community property states. Occasionally, student loans can be considered as community property, particularly if they were used to provide housing or essentials for both spouses when one spouse was in school.

These laws can typically be overcome by a prenuptial agreement (often called a ‘Prenup’), provided that each spouse entered the prenuptial agreement without any compulsion and with full knowledge of what they were signing. Check out Rocket Lawyer’s handy checklist if you think you should consider using a prenuptial agreement.

Happy proposing!

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