In divorce, the spouses are first asked to agree on an equitable division of their personal and real property. If the spouses cannot agree, they will be compelled to follow their state law concerning property division.
This article covers the differences between community property states and separate property states, sometimes called equitable property states. But first, we need to define community property from separate property.
Community Property And Separate Property
Community Property
Community property is defined as all property that was acquired during the marriage. Community property is considered marital property and is divided equally between the divorcing parties.
Separate Property
Separate property is defined as any property the spouses acquired before the marriage or after their marriage. Separate property belongs to the spouse that owned the property before the marriage.
In many states, property that is inherited or gifted to one of the spouses during the marriage will be considered that spouses separate property – unless the property becomes commingled with the couple’s community property.
Commingling occurs when the proceeds from one spouse’s separate property are placed in a jointly held bank account, also called a marital or joint account which has the right of survivorship.
Short Versus Long-Term Marriages
Short-Term Marriages
The legal classifications between separate and community property can become problematic in short-term marriages. This is especially true for those lasting under a year and assuming each spouse kept their property separate. This is usually the case where a short-term marriage ends in the union being voided through the legal process of annulment.
In such cases, the court’s goal will be to put the spouses back into their financial position before the marriage. Each spouse will be able to hold on to their respective property.
Long Term Marriages
If the marriage was a long-term marriage, say ten or more years, it is more likely that the character of the property had changed over time, mainly because the spouses will commingle their money and share the use of their property.
In these cases, what might have started as separate property can be converted into community property. The legal name for this change in the property’s character is transmutation.
Transmutation
Commingling of Assets And Property
Transmutation happens when there is a comingling between separate and community property. The best example of this is a joint portfolio of accounts. In cases where money has been comingled into different types of joint accounts and purchases made from those accounts, the property purchased from those accounts, such as a car or a home, will be considered community property.
When there is evidence of commingling of funds, the court will examine which real or personal property was purchased from joint accounts. This divorce court process is called tracing, which can get complicated.
Community Property and Equitable Distribution States
Divorce by State
Different states have different rules in defining and dividing various forms of property. As of 2023, there are nine pure Community Property states: Arizona, California, Idaho, Louisiana, Nevada, New Mexico, Texas, Washington, and Wisconsin.
The remaining states are considered a form of separate property states called Equitable Distribution states of one form or another and have their own rules in determining what is or is not equitable. Most of the time, this is a function of how much discretion states afford their judges in distribution matters.
Equitable Distribution States
In Equitable Distribution states, assets are divided equitably but not always evenly. The court may determine, under certain circumstances, it would be fairer to award each spouse a different percentage of the total value of the marital property.
Property division can become highly contested in marriages where both spouses are income earners and possess a large and diverse portfolio of assets, cash, and property, especially if the parties assume an aggressive posture in the divorce.
These are some reasons you may wish to consult an experienced divorce lawyer before litigation commences.
State Divorce Law Summaries
Divorce Lawyers
If you have questions or require additional information about your legal rights and obligations, consult a verified Divorce Lawyer as soon as possible.
