Community Property States: List and Meaning
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Community property states are states in which both spouses have equal ownership of assets acquired during the marriage — called marital assets — regardless of who acquired the asset. Community property states generally require divorcing couples to split assets acquired while living in the state 50/50, with some exceptions.
Community property states
Nine U.S. states are community property states, meaning they have community property laws in place that give spouses equal ownership of any assets acquired during the marriage.
Arizona.
California.
Idaho.
Louisiana.
Nevada.
New Mexico.
Texas.
Washington.
Wisconsin.
What counts as community property?
Community property assets include:
Financial assets, including bank accounts.
Real estate.
Personal property, including cars, furniture and artwork.
Income earned.
Retirement accounts, including individual retirement accounts (Roth IRA) contributed to during the marriage.
Debt acquired by either party.
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What is not community property?
There are a few cases in which community property laws may not apply, depending on state laws. Common exclusions include:
Property named separately in a prenuptial or postnuptial agreement.
Property that was acquired while living in a state in which community property laws don't apply. Depending on the state, there are some exceptions to this rule.
Any gifts or inheritance received by either spouse during the marriage.
Awards for personal injury damages.
» MORE: How to know if you need a prenup
Community property states vs. common law states
The main difference between community property states and common law states is whether spouses are entitled to joint or separate ownership of the property.
In common law states, each spouse is entitled to full ownership of assets or property acquired separately during the marriage. Spouses in common law states can agree to a division of property as they see fit, provided that both parties sign a written agreement.
For example, they can title their home as joint tenants with rights of survivorship so that when one spouse dies, the other receives the home without having to go through probate.
Community property laws by state
Community property is determined by the state where the couple has their primary, legal residence. Some states have specific rules and regulations:
Community property law applies to domestic partnerships in California, Nevada, Wisconsin and Washington, meaning you may not necessarily have to be married for the law to apply.
You may be able to convert assets into community property in Alaska, Florida, Kentucky, South Dakota and Tennessee. However, you may need to establish a community property trust to do so. Community property trusts are a type of trust that assigns equal ownership of property to both spouses. With this kind of trust, both partners’ halves of the property’s cost basis will be “stepped up” to the current market value, which can reduce the capital gains taxes if a surviving spouse sells the property.
Most states require a finalized divorce decree to legally terminate the community property estate, even if the spouses no longer live together. California and Washington recognize physical separation with the intention of divorcing as grounds for termination of a community property estate.
» Get started: Setting up a trust
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