Community property is a term used in many states and several countries to suggest that both spouses equally share property owned or acquired in a marriage. Should the marriage end in divorce, or sometimes even in an annulment, each spouse is entitled to exactly half of the assets, and half of the debts. Many states in the US are community property states. If you marry in one of these states, or get divorced in one, the assets owned at the time of separation are subject to a 50/50 split.
Many people wonder if there are any exceptions to community property laws that govern the splitting up of assets. There are actually a couple that bear mentioning. Someone who is the sole inheritor of property or assets, may not have to count anything inherited as community property. In most cases though, all things acquired during the marriage, including gifts to separate spouses belong to both spouses. Furthermore, length of the marriage may not be taken into account when considering this split. Whether a marriage lasts a week, a few years, or many years, the community property law applies in states or countries where it is applicable.
The one way to avoid a 50/50 split of assets and possessions is by creating prenuptial agreements that state a lower or higher amount of the assets will be awarded to a particular spouse on the dissolution of a marriage. When people come into a marriage with considerable property holdings, or if one spouse makes much more money than the other, spouses may agree upon a set division of funds that differs from the 50/50 split. Provided such an agreement does not violate any laws, any divorce would follow the prenuptial agreement instead of going by community property rules.
When there are minor children in the marriage, certain things acquired aren’t usually considered under community property rules. For instance, a child’s bed could technically be considered jointly shared, but it probably wouldn’t be counted as assets, and would go to the parent with custody. There could be some arguing over furniture, baby supplies and such if parents have joint custody of children.
Many people want to know exactly what “assets” are as they relate to community property. A short list could include:
All physical property, from real estate to cars, and from appliances to furniture
All money made during the marriage
Any money deposited in 401k, savings or retirement accounts
Any collections (art, stamp, otherwise)
Any businesses begun during the marriage
Any gifts received by either spouse unless solely inherited and not commingled with household funds
Any money in bank accounts, regardless of whose name is on the account
Any electronics equipment
Potentially future earnings from things made during the marriage. For instance if you sell a book during a marriage, and it takes off as a bestseller after a divorce, an ex-spouse might be entitled to half the profits.
When one spouse would really like to keep something acquired during a marriage, and the other spouse doesn’t dispute ownership, the new “owner” must still recompense half the value of the thing owned to the spouse. When there are considerable assets, people may trade off on things of equal value, but when there are few assets, the spouse who doesn’t get physical property does need to be reimbursed. “Real” value is usually defined as the value of something as assessed currently; it tends not to mean what an item cost initially, but what it could be purchased for it was sold now.