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What it Means to Divorce in a Community Property State

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If you are about to file for divorce and you live in California, you are divorcing in one of the handful of community property states, which could have an effect on how your assets and debts are divided. The community property states, include:

  • Alaska (residents can opt-in)
  • Arizona
  • California
  • Idaho
  • Louisiana
  • Nevada
  • New Mexico
  • Texas
  • Washington
  • Wisconsin

All other states divide marital property under the laws of "equitable distribution."

The laws of community property are simple: most assets acquired during the marriage are split equally or 50/50 upon divorce, no matter how they were earned or who earned them.

What counts as property? Property includes anything that can be bought and sold, including: a home, vehicles, furniture, or clothing. Property also includes anything of value, such as:

  • Cash
  • Stocks
  • A patent
  • A business
  • Bank accounts
  • Life insurance with a cash value
  • Security deposits on a home
  • Pensions and 401(k) plans

Since California is a community property state, this means that debt acquired by the couple during the marriage is "community debt" and therefore both spouses are equally responsible for the debt upon divorce.

What about assets owned before marriage?

Assets accumulated before the marriage are considered separate property. Inheritances or gifts to one of the spouses are also considered separate property, even if they were acquired during the marriage.

Rents and profits earned from separate property is separate property, and any property purchased with separate property is considered separate property.

Deciding on Your Own Settlement

As long as you and your spouse can agree on the terms of your divorce settlement, California's community property laws may not come into play. If you can't reach such an agreement, a judge may ultimately decide how your assets will be divided based on the state's community property laws.

If you are an individual with a simple or complex wealth plan and are getting divorced and you reside in California, you should consult with a Los Angles divorce attorney from Claery & Hammond, LLPfor advice on your situation.

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