The Differences Between Community Property and Separate Property
Arizona is one of about ten states that is a community property state. Most other states are common law states. Understanding the affects of being a community property state are a key issue in divorce proceedings. Whether your state is a community property state is also an important estate planning issue. You can’t give away your property in a will or a trust if you don’t fully own it.
Our Arizona estate planning lawyers work to ensure you either own the property outright or we work with your spouse or ex-spouse (and their lawyers) to dispose of your property together. It is important to resolve ownership issues while you are alive. Otherwise the right to your assets may be subject to litigation.
Marital property and separate property
Generally, before analyzing community property issues, your Arizona estate planning lawyer will review whether your property is marital property or separate property.
- Marital property: These are the assets spouses earn or accumulate during the marriage. Common examples include a home, furniture, and cars. The income and personal possessions such as jewelry and clothing are also marital property.
- Separate property: This property is owned by just one spouse. Examples, with some exceptions, include:
- Assets each spouse owned before getting married
- Gifts either spouse received at any time
- Property one spouse obtained during marriage that never benefited the other spouse
- Inheritances received at any time
- Property acquired during marriage that the spouses agreed to keep separate through an agreement
- The pain and suffering part of a personal injury award
How Arizona’s community property status affects property ownership, control, and transfer
In community property states, the starting point is that most marital property is considered owned equally by both spouses – both spouses have an equal right to it.
Other important factors in community property states.:
- An equal interest is different than an equitable interest. In the case of a divorce, non-community-property states generally divide the marital property equitably. This can result in a 60/40 split, a 70/30 split or some arrangement other than 50/50. Community property states divide the property 50/50.
- How the property is titled is not material in community property states. If, for example, a home is titled in just the husband’s name – both the husband and the wife have a claim to ½ of the home. This, generally, also means that selling the marital home requires the consent of both spouses.
- Marital debts are the equal responsibility of both spouses.
In a community property state such as Arizona, some property is still considered separate. This includes:
- Gifts the other spouse receives
- Property your spouse owned before the marriage – provided it was used separately while you were married
Your Arizona community property lawyer can explain which assets your spouse can claim and which ones he/she can’t.
Estate issues in community property states
Before you prepare a will, trust, power of attorney, or other estate documents you need to review with your lawyer the following issues:
- When your spouse can’t contest how you dispose of your property. Generally, you can dispose of separate property any way you desire – a will, by gift, by trust, by sale, or by other legal manes.
- When your spouse can contest how property is transferred. Generally, to dispose of marital property, you need the consent of your spouse since both spouses have an equal claim to it. Pre-nuptial and post-nuptial agreements can help to make marital property become separate property – property you can dispose of.
- Common interests. Often, both spouses want the other spouse to have their homes, accounts, and other marital property when they first spouse dies. They also, often, want the same people, to have their assets when the second spouse dies. In this case, you and your spouse should be able to reach an agreement.
- Conflicts of interest. When the desires of the spouses are different (they have children from different marriages) or when it’s unclear if the property is marital or separate; the spouses may have a conflict of interest. They then should try to forge a solution – sometimes with the help of separate lawyers – to avoid litigation over the assets.
Learn more about community property and how it affects your wills, trusts, and estate documents
Our Tempe Arizona lawyers help spouses, divorcees, and those who are contemplating getting married understand how community property laws affect your assets. We work to prepare the right documents so that the people who get you want to receive your property have legal ownership of that property. At Yaser Ali Law, we advise young, middle-aged, and older residents about their estate planning needs. To talk with a respected estate lawyer, please phone us at (480)-442-4175 or fill out our contact form to schedule an appointment.