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.
Community Property States
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.
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.