Divorce, Debt And Assets In Community Property States
The vast majority of states in this county follow an equitable distribution model when dividing debt and assets in divorce, but at least 9 states follow the community property system. The differences in the two systems can have a major impact on your divorce settlement, so read on to find out more about how debt and assets are divided in a community property state.
What are the community property states?
The following states abide by community property laws, where the assets and debts of the marriage are considered to owned by the "community", or the marital estate, rather than each person individually:
- Arizona
- California
- Idaho
- Louisiana
- Nevada
- New Mexico
- Texas
- Washington
- Wisconsin
It should be noted that in addition to the above community property states, Alaska gives divorcing couples a choice in designating that certain aspects of their marital property be community or equitable distribution.
How is property handled in community property states?
All property purchased during the marriage is considered community property, and thus owned equally by both parties. This property may include real estate, savings and investment accounts, vehicles, furniture, pets, artwork, jewelry, etc. One major benefit to community property law is to allow more financial parity to a non-earning spouse (such as a spouse who stayed home to care for children).
Property division guidelines in community property states include 2 exceptions:
1. Income and property that was owned prior to the marriage is not considered community property, unless the property is allowed to become intermingled with a joint asset or account. For example, if one spouse had money in a money market account prior to the marriage, but used income from the other spouse to continue funding the account, the entire contents of the account would become community property.
2. Inheritances and gifts given to one party are always exempt from community property, even if the inheritance or gift was given while the parties were married.
How is debt handled in community property states?
Unlike property held by only one spouse prior to marriage, debt held by one party prior to marriage automatically becomes a community property debt. It would be wise to have a realistic picture of your fiance's financial situation, especially their debt, prior to marriage, since their debt becomes your debt if you marry in a community property state. Moreover, even after a divorce is final creditor's have the right to seize property awarded to either party if the debt goes unpaid.
It's highly advisable for those who wish to marry and who reside in community property states to seek the assistance of a family law attorney to craft a prenuptial agreement that will help protect both your assets and debt liability. Even without a prenuptial agreement, those divorcing in community property states will need the guidance of a good divorce attorney to remain financially solvent.
To learn more about divorce law, visit a website like http://www.glfamilylaw.com.
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