Community Property and Divorce
Key Points
  • In a community property state each spouse has a claim to one-half the assets acquired during marriage. This is the assumption and is not always the case and typically gifts and inheritances are excluded.

Community property is all income or property that was acquired during the marriage, with the exception of gifts or inheritances. Community property and its distribution in a divorce is at sharp variance from a common law property distribution.

In this routine, a husband and wife own their marital holdings in common, regardless of title, giving each spouse an undivided one-half interest in the whole asset. Each spouse has a claim to one-half the earnings of the other.

Some states allow for equitable distribution when justice is served.

Three community property states, only California, Louisiana and New Mexico always divide equally. Three other community property states -- Idaho, Nevada, and Wisconsin -- begin with the presumption that it should be equal, and then entertain arguments to the contrary from either spouse. Equal division does not mean that each asset is split in half; instead the court makes certain that the total of the assets is divided in half. Alaska permits couples to elect community property status for divorce purposes.

Legal counsel should be consulted because the rules on distribution vary from state to state and have many exceptions.

Useful Online Tools

Suggested Reading
The Property Division Handbook The Property Division Handbook
This book will explain in detail the property distribution aspect of divorce and separation. It will focus on the rights each spouse has under certain laws, situations, and circumstances, and how the division of the property will be decided by the court or through negotiation.

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COMMUNITY PROPERTY VERSUS EQUITABLE DISTRIBUTION -- There are two basic ways to handle divorce property division: Community Property: Alaska, Arizona, California, Idaho, Louisiana, Nevada, New Mexico, Texas, Washington, Wisconsin and Puerto Rico are community property states. This means that all marital property is typically defined as community property or separate property. When divorcing, community property is typically divided evenly, and each spouse keeps his or her separate property. Equitable Distribution: All other states follow equitable distribution. This means that a judge decides what is equitable, or fair, rather than simply splitting the property in two. In practice, this may mean that two-thirds of the property goes to the higher earning spouse, with the other spouse getting one-third.
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