Community Property - Part One - What is Community Property?

I believe that I have mentioned this point before. The federal government, generally, defers to states in determining the "character" of property. "Character" is typically a term of art surrounding descriptions of ownership.

"Community property" is a term used to describe marital property. Not all states use the term "community property". In fact, there are only nine states in the U.S. currently that have community property systems as the standard marital property system, with Alaska allowing for couples to opt-in to a community property system. (For those of you who are wondering, the nine states are: Arizona, California, Idaho, Louisiana, Nevada, New Mexico, Texas, Washington and Wisconsin).

I admit that I am a geek - and for some strange reason, I find the subject of community property to be very interesting.

California Family Code Section 760 defines community property as such: "Except as otherwise provided by statute, all property, real or personal, wherever situated, acquired by a married person during the marriage while domiciled in this state is community property."

Mind you the real tricky part of that definition is "[e]xcept as otherwise provided by statute"!

Generally, all property acquired after marriage is presumed to be community property. The major exception to this presumption is that gifts or inheritances received during marriage, if given solely to one spouse, are presumed to be the separate property of that spouse.

Why do I care whether property is "community" or "separate"?

This determination of whether the property is "community" or "separate" provides significant rights regarding ownership and management of the property. Family Code Section 751 states: "The respective interests of the husband and wife in community property during continuance of the marriage relation are present, existing, and equal interests."

English, please?

Ignoring for the moment that the section is using terms of "husband and wife" (or at least, I'm trying to), what this section states is that the interest in property that is deemed to be community property during the marriage (and during the domestic partnership) are "present, existing, and equal". What this means is that at the moment the money is earned during marriage, both parties have an immediate and equal property interest in the community property. Not simply a future interest at death or divorce, but an immediate 50% interest in the property as soon as it is earned.

Now there are special rules for the distribution of community property when the community ends. What happens depends upon whether the community ends because of divorce or death. For purposes of this blog, we'll focus on what happens at death.

At death, the surviving spouse retains an interest in the community property. If the spouse dies intestate (without a will), the probate code dictates that the surviving spouse receives 100% of the community property. If the spouse dies with a will or a trust, the deceased spouse does NOT have the power to give away by such device the full value of the community property - only his or her share of the community property. If the deceased spouse tries to give away more, the surviving spouse has rights to elect to receive her share of the community property.

"Community Property", "Marital Property" were terms that gay couples (other than those of us who were going to law school) had little reason to know before 2005. The terms didn't apply to our relationships. The California legislature changed that effective in 2005. In 2005, newly registered domestic partners were subject to community property laws, and previously registered domestic partners had to proactively opt out to prevent this property system from being applied to their relationships.

See my next post for a brief discussion on the issues raised by community property.