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Living Trusts Glossary

COMMUNITY PROPERTY

A principle of law applicable to the following states: Arizona, California, Idaho, Louisiana, Nevada, New Mexico, Texas, Washington, and Wisconsin. All other states follow a rule of separate property (see definition).

In a community property state, each spouse owns 50% of all property acquired during the marriage. Unless otherwise agreed in a prenuptial agreement, this includes money earned during the marriage and anything purchased with that money. Property received as a gift or an inheritance and property obtained before the marriage is considered the separate property of the person receiving it.

It's usually a good idea to consider the source of the money used to buy an item if you're not sure if it is community or separate property. This may be helpful with items like insurance policies.

In a community property state, each person owns half of the community property. A spouse can only give away his or her half of that property. For example, if a coin collection is community property, the husband can use his will or trust only to give away his 1/2 interest in the collection.