17. Community Property

There are eight community property states: Arizona, California, Idaho, Louisiana, Nevada, New Mexico, Texas, and Washington. These community property laws tend to follow the French or Spanish civil laws introduced at the time of colonization, but no two of the states have exactly the same law.

Property owned by either spouse before marriage or acquired after marriage by gift or inheritance is "separate" property. All other property acquired after marriage is considered to be "community" property. Each spouse may be said to have an undivided one-half interest in all community property, regardless of which one is the titled owner.

Separate property, if commingled with community property so as to lose its separate identity, becomes community property, as a general rule. Upon death, one-half of each community asset passes to those named in the
decedent's will, or passes by the laws of intestacy.

In most community property states neither spouse has the right to give away or convert to separate use any substantial amount of community property without consent. Earnings of either spouse during marriage, all
fringe benefits of employment, and life insurance policies acquired while a resident of a community property state are considered community property.

It is possible for one spouse to make a gift of community property interest to the other spouse, and thus make it the separate property of the donee spouse. Such gifts involve many considerations, and should be made only after careful consideration and legal counsel.

Assets acquired in a community property state retain their "community" status if a couple moves to a common law state, even if the assets are sold and converted into different property. For example, if the community
residence is sold in a community property state, and the proceeds are applied to purchase a home in a common law state, the "community" interest carries over to the new home. Special care is required in the financial and estate planning of couples previously residing in community property states.

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