Divorce In A Community Property State: What It Means To Assets And Debts

Well-publicized celebrity divorces have introduced the concept of community property to nearly everyone, but California is only one of about 9 states that use this method of dividing up marital assets and debts. If you are residents of a community property state, your divorce settlement will likely look a lot different from those divorcing in the other states--the equitable distribution states. Read on to learn more about what it really means to divorce in a community property state.

Community Property States

The "community" (in other words, the married couple as a whole) own both the debts and the assets of the marriage in the following states:

  • Arizona
  • California
  • Idaho
  • Louisiana
  • Nevada
  • New Mexico
  • Texas
  • Washington
  • Wisconsin
  • In Alaska, they use a model that allows the couple to decide under what type of rules they wish to divorce, either community property or equitable distribution.

What is Marital Property?

Almost anything purchased during the marriage is considered marital property, including homes, cars, and pets (yes, pets are considered property for divorce purposes). It doesn't matter whose money was used to buy that property, it's all owned by both parties. As you might imagine, this rule greatly benefits a spouse who stayed home to care for the children instead of pursuing an education or building a career.

The two major exceptions to the ownership guidelines:

1. Any property (including money in a savings or investment account) owned before the marriage is not included in the marital property division. If the account is converted into a joint account or funds from both parties are intermingled, it may be considered marital property depending on the rules of a particular state.

2. Any inherited property, even that inherited after the marriage, is exempt from community property, as are gifts given to one party exclusively.

Marital Debt

Unlike community property held prior to marriage, debt acquired before marriage does become part of the marital estate. For example, if you marry a person with $50,000 in credit card debt, that debt becomes your debt upon marriage if you divorce in a community property state. With that in mind, try to work with your spouse to pay off any debts before divorcing, since the divorce will likely divide you and your partner's debt in half.

Consult with an family law attorney for more information and guidance if you are divorcing in a community property state. Working with your spouse to resolve financial issues outside of court can help reduce court costs and help ensure that a you get a fair marital settlement agreement.

Legal professionals like Burgess, Harrell, Mancuso, Colton, La Porta & Shea can give you more information.