Community property, which encompasses all the possessions that a married couple share, comes into play in many divorces today. A big part of any divorce is division of property, and community property laws make the rules for that division very clear. Here is everything you need to know about community property as it relates to divorce.
The Community Property States
You may sometimes hear people refer to "community property states," meaning US states that have the community property law in place. Currently, there are nine states that have community property laws. They include:
- New Mexico
In states that don't have community property laws, marital property will be divided in a way that the court deems fair. However, it may not be a completely equal division.
What Qualifies As Community Property?
Community property includes all the assets and debts that were acquired during the course of the marriage. If debts or assets were acquired prior to the marriage, they are classified as separate property, and are thus not part of the community property.
Is Any Property Exempt From Community Property Division?
One type of asset is exempt from being considered community property, even if it was acquired during marriage. If a spouse receives an inheritance or other valuable gift during the marriage, that property is exempt from community property division.
For example, if one spouse inherits a home and money from a relative, that inheritance will be exempt from division during the divorce. The property must be kept separately from any joint marital accounts to exercise this exemption during divorce.
How Is Community Property Division Done In a Divorce?
Community property laws state that a 50/50 division must be done during the divorce. In some cases, the spouses are able to come to an agreement regarding what equals 50/50 division to them. They are thus able to divide assets and debts without having to sell marital property. However, in many cases the assets must be sold.
Once the assets are sold, the court splits the proceeds evenly between the two spouses. Any debts will be split between the two spouses as well.
While community property division may seem straight-forward, the finances can actually get quite complicated in a divorce. This is especially true if there are assets like pensions and 401k plans to consider.
It is generally best to consult a divorce attorney for help rather than trying to deal with these difficulties on your own.