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Legal Issues For The Elderly… Community Property

jeff-mckenna-newIssue 10.10

The term “community property” is a form of property ownership between husband and wife – recognized in Nevada, Arizona, California, Idaho, Louisiana, New Mexico, Texas, Washington and Wisconsin.  The other states are “common law” states.

The defining feature of community property is this: Irrespective of the name(s) on title documents, ownership of (almost) ALL property – including income from wages and self-employment – acquired during marriage by either spouse is automatically split, so that each spouse owns a separate, undivided one-half interest.  (An “undivided” interest is one in which each spouse has half ownership of the whole, rather than full ownership of only a specific half.)

In community property states, property acquired by a spouse separately and brought into the marriage remains separate.  In these states, too, property acquired by gift or inheritance, or in exchange for separate property or money, also remains separate.  Commingling of assets can obscure separate property ownership, until it finally becomes community property.  This often happens with checking and other financial accounts.

Since the two equal interests of the spouses in community property are separate, each spouse is free to dispose of his/her half of community property in a Will.  It does not automatically pass to the survivor, as it would if owned jointly, with right of survivorship.

The subject of community property deserves the attention of three groups of readers: Spouses who now live in a community property jurisdiction, those who now live in a common law state, but who acquired money or property while living in a community property state previously, and those who now live in a community property state, but who acquired money or property while living in a common law state previously.

It is possible in some community property states for the spouses to change their respective ownership rights in an asset, from community property to separate property and vice-versa, simply by written agreement between them.

In a community property state, a spouse’s actual contribution to the marriage, and to the couple’s marital property, is largely irrelevant.  A spouse is, by law, entitled to half.  This is true even if one spouse has worked throughout the marriage, and the other has not worked at all.

State laws vary, and these issues can be complex, so be aware that special attention needs to be given to the issue of community property, if you are affected by it. If so, it is important to see a lawyer for guidance in understanding the extent of each spouse’s property rights – before attempting to give it away by gift, in a Will or in Trust.

Jeffery J. McKenna is a local attorney serving clients in  Utah, Arizona and Nevada. He is a shareholder at the law firm of Barney, McKenna, and Olmstead with offices in St. George and Mesquite.  If you have questions you would like addressed in these articles, you can contact him at 435 628-1711 or jmckenna@barney-mckenna.com.

 

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