Do You Live in a Community Property State?

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With the constant stream of celebrity news, it’s hard not to be aware of some of the property issues that arise when the super rich divorce. But some property issues are relevant in all divorces, regardless of the net worth of the individuals involved.

A house purchased together may be one of the largest assets for many couples. When one or both spouses worked to build a business, even more money could be involved. They each may wonder who will own the business if they divorce. An article on Inc.’s website discusses some of these issues.

The rules will vary depending upon the state in which you live. States are either community property states or not. Most states are not and are considered equitable distribution states where property is distributed fairly, but not necessarily equally.

Community Property

There are nine community property states: Arizona, California, Idaho, Louisiana, Nevada, New Mexico, Texas, Washington and Wisconsin. Alaska is an opt-in community property state that gives both parties the option to make their property community property.

An IRS website stresses that it’s important to determine the proper domicile. Domicile is a person’s legal permanent residence and may not be where they currently live. For those in the military, people who have homes in several states, or for those who have moved frequently, figuring out which state is their proper domicile is key.

IRS Publication 555 gives further guidance and states that generally community property is property:

  • That you, your spouse, or both acquire during your marriage while you and your spouse are domiciled in a community property state.
  • That you and your spouse agreed to convert from separate to community property.
  • That cannot be identified as separate property.

 

Guidance is also given regarding what is considered separate property:

  • Property that you or your spouse owned separately before your marriage.
  • Money earned while domiciled in a noncommunity property state.
  • Property that you or your spouse received separately as a gift or inheritance during your marriage.
  • Property that you or your spouse bought with separate funds, or acquired in exchange for separate property, during your marriage.
  • Property that you and your spouse converted from community property to separate property through an agreement valid under state law.
  • The part of property bought with separate funds, if part was bought with community funds and part with separate funds.

 

A valid premarital agreement is an agreement that may change the result of property division.

50-50 Split

A community property state presumes both spouses equally own all marital property and it will be split 50-50 in a divorce.

The Uniform Marital Property Act was enacted in 1983 by the Uniform Law Commissioners. It was created to encourage sharing by spouses of property acquired during marriage by creating a class of property in which husband and wife have an equal interest. Wisconsin was the first state to adopt the Act. Alaska allows spouses to choose community property by written agreement.

Dodging A Bullet

A celebrity divorce that sports fans, especially Los Angeles Dodger fans, are watching closely is that of Frank and Jamie McCourt. Frank McCourt became the fourth owner of the Los Angeles Dodgers in 2004. However the ownership of the team is at center stage of the divorce. Frank claims that a post-nuptial agreement gave him sole ownership of the team. Jamie disagrees. She disputes the validity of the agreement and argues that the team should be community property. After the trial ends and the judge rules, the ownership of a professional baseball team may be decided based on community property law.

 

Sources:

How to Protect Your Business in a Divorce, by Jeff Landers, May 25, 2010.
IRS Courseware - Military Income: Community Property States
IRS Publication 555 (5/2007), Community Property
Uniform Marital Property Act
A Few Facts About The Uniform Marital Property Act
Chapter 34.77 - Alaska Community Property Act
McCourt Dodgers trial continues, by Molly Knight, September 27, 2010.

Comments

I have concerns for my aunt in Indiana. Her husband of 15 years recently passed away. She dated him for 8 years before they got married and he was divorced for 3 years before they met. He has 3 adult children.

He had insisted on a prenup. His schedule A listed the house that he lived in (and she moved into after their marriage), sporting equipment, a truck, odds and ends (she's not concerned over these things.) They sold the house listed in the prenup 3years ago and bought a house that they lived in and she is currently still living in. He sold the truck listed in the prenup and bought another truck that he put in his and his son's name. After the sell of the house listed in the prenup. he put $56,000 in a CD for his son with his and his son's name on it. He was retired and my aunt continued working until around the time when they moved to their new home. He was becoming too ill and she felt she needed to be there with him all the time. She didn't realize that he put about double that money in a CD with only his and his son's name on it. When they bought the house he insisted his son's name be on the deed as well. (He was trying to not have her name on it, but the title company told him that was illegal.)

I know he's an S.O.B. and that she should've protected her interests better. She is living in a house titled in her name and his son's name. He had a will made out that said everything listed in the prenup went to the son. His son's attorney is saying he's not agreeing to her living there until she dies and then taking possession. Her attorney that went to the "reading of the will" with her just dropped her and told her to get a different type of attorney. I am across country from her. Is there anything about possession of a house in Indiana with your name on the title that will protect her from having to move, pay his son half of the appraised value, or bar him from the premises? What kind of attorney should she really have and how in the world do you find someone you can trust?

Hi, this is a good question, and we are sorry to hear about this situation. We'd love to help, but our specialty is legal documents, not legal advice. However, you can get free legal advice on the LegalZoom Facebook page every Friday. Check out Free Joe Friday: http://zoo.mn/FreeJoe.

My parents had a Living Trust containing their home and Bank accounts. There are three equal benefisiaries.I have one brother and one sister and we were all named equally.In the year 2000,my parents were involved in an auto accident,killing my father and injuring my mother.My mother had previously suffered a small stroke which left her unable to make decisions on her own.We three siblings decided at that time,with Moms good graces,that she needed help in making decisions involving her health and finances.At that time,(after all life insurances payments) there was approximately $350,000.00 in the Bank and their home with an approximate $150,000.00 value. My mother also received a retirement check from the Federal Government each month(my Fathers Postal retirement)worth approximately $2700.00 monthly.

My brother volunteered to take care of the Financial portion of the Trust including paying the monthly bills, yearly taxes, medical bills,home care,and care in an assisted living facility.

Mom passed away in 2006 thus leaving the assets to we three siblings. Since Moms death, my brother has succeeded in spending all of the remainder of the bank account without my sister and my consent($150,000.00) plus he did not notify the Federal government to cancel the retirement payment.He kept receiving the funds which were auto deposit into the trust account.Needless to say,the Feds caught onto him and has made his life miserable ever since.I never thought that my brother would have done something like this to my sister and me.We evidently were quite stupid to trust him and to give him that power.

Since he broke the Bank account of the Trust,I have been paying all bills and taxes for the property(approximately 5 years). The home is the only item left in the Trust and is used as a summer get-a-way house for all of the family(except my brother).

My question to you is: What document do you have that will remove my brother as a beneficery to this living trust? My brother has agreed to being removed as a beneficery.Can this be done with just a Notary with his siginature?

Thanks you for your time.

Hi, thanks for contacting LegalZoom, and we are sorry to hear of this situation. LegalZoom makes creating legal documents easy and affordable, but since we're not a law firm, we can't give specific legal advice regarding your situation. However, you can get free legal advice on the LegalZoom Facebook page every Friday and Tuesday. Check out Free Joe: http://zoo.mn/FreeJoe.

im trying to find an actual post nuptial agreement form where can i find a blank one? i am currently married and want to buy a house in florida and i do not want my wife to be associated at all with the buying or actual ownership

then y r u married?

My husband and I inherited land and stocks from his father upon his death. If I should divorce my husband, would I be entitled to half of the inherited funds? We live in Idaho and have a will and a living trust, as we have 4 children all married and living in the same state.

Thanks for contacting LegalZoom. LegalZoom makes creating legal documents easy and affordable, but since we're not a law firm, we can't give specific legal advice regarding what you would be entitled to receive. However, you can get free legal advice on the LegalZoom Facebook page every Friday and Tuesday. Check out Free Joe: http://zoo.mn/FreeJoe.



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