Debts, Assets, Divorce And Community Property
Posted on: 4 July 2016
The division of the marital estate, which consists of debts and assets, depends greatly on whether or not you and your spouse live in a state that uses community property laws or in one that uses what's known as equitable distribution. There are only 9 states using the community property provisions, and if you are divorcing in one of these states it's in your best interest to understand what is meant by community property and how it affects your debt liability and property distribution. Read on to learn more about community property, debt and assets.
Marital Debt in Community Property States
All debts that were incurred during the marriage, regardless of whose name is on the account or who used the account, are jointly owned by the marital estate. The marital estate is you and your spouse, and comprises the "community", in community property. What this means is that if your spouse has poor financial skills and has run the credit card debt up sky high, you may be obligated to pay a portion of that debt in the divorce settlement.
Marital Property in Community Property States
Just as with the marital debts, most all property is owned by the marital estate. This can include real estate, automobiles, jewelry, art, investment accounts and even your pet dog or cat. As long as the property was procured during the marriage, it is owned jointly by the community. It doesn't matter who's money was used to buy an asset, all assets are jointly owned. This type of property distribution model can greatly benefit stay-at-home spouses, who may have sacrificed their education or careers to raise a family or support a spouse through their career. There are two main exceptions to the community property division rules:
1. Any property owned prior to marriage is left out of the marital estate equation, unless that asset was commingled. The determination of ownership of property can often get confusing and contentious in cases where the assets of one party come in contact with the assets of another party.
2. Regardless of when property is inherited, that property is always exempt from community property provisions. Additionally, any gifts that were expressly given to one party only are not included in the marital estate.
If you are facing a divorce and live in a community property state, contact a divorce attorney to assist you in crafting a divorce agreement that protects your rights and your property.Share