Living Trusts Glossary

Community property is observed in the following states: Arizona, California, Idaho, Louisiana, Nevada, New Mexico, Texas, Washington and Wisconsin. All other states follow the rule of separate property (see definition).

In a community property state, each spouse has 50% ownership in all property acquired during the marriage. This includes money and wages earned during the marriage as well anything purchased with that money, unless the spouses agreed otherwise in a prenuptial agreement. However, property acquired through a gift or inheritance is considered separate property, as well as property acquired before the marriage.

When determining whether property is community or separate property, you should consider the source of the money used to purchase the property. This is particularly true with insurance policies.

In a community property state, a spouse may only give away their half of the interest in any community property. The other half automatically goes to the surviving spouse. For instance, if a coin collection is community property, the husband may only give away one-half interest in the collection through a will or living trust.