LA Probate Law on Community Property
Married couples and domestic partners are subject to community property laws. Community property includes all assets acquired by spouses during marriage while domiciled in California, except for inheritances and gifts made to only one spouse. The state of California considers any property acquired during a valid marriage by a husband or wife community property. Sections 760 and 771 of the California Family Code outline the state law pertaining to community property. During a divorce proceeding, a judge will equitably divide community property based on possession, the wage earnings of both parties and the length of the couple’s marriage states LA Probate Law. Unless a couple signs a prenuptial agreement, California community property law only applies if the couple divorces in the state.
Why does Community Property Affect Estate Planning?
Spouses may want to give certain assets to their children from a previous marriage, for example, or to someone who is not a member of the immediate family explains LA Probate Law. A will or trust might say, for example, “I give my community property to my spouse, and I give my separate property to my children who were born during my first marriage.” Community property and separate property can also be issues when someone dies without a will. If a California resident dies without a will or trust, they die “intestate” and the laws of intestate succession are used to determine who will inherit the estate. Having a proper Will is critical to distributing your estate in accordance with your wishes. When a person dies without a Will, California law will guide the division of assets through probate court in a process known as Intestate Estate. No surviving family members will have a say in how the assets are divided; the issue will be decided under the discretion of the court in accordance with state law.
How is the Community Property to be Divided?
The law does not require an “in kind” division of the community property, which would mean you, would have to divide each physical object. All that the law requires is that the net value of the assets received by each spouse must be equal. Thus, it is not uncommon for one spouse to be awarded the family residence, with the other spouse receiving the family business and investment real estate, as long as each spouse gets assets that are equivalent in value. Since the total net value of the assets being received by each spouse is equal, such a division is proper states LA Probate Law. Ordinarily, it is not difficult to determine whether a particular asset is community or separate property. However, certain types of assets can pose unique problems in this regard, including a business that one spouse owned before marriage and both spouses worked on during the marriage, or property that belonged to one spouse before marriage but was shared during the relationship. When a married person accumulates an interest in a pension, retirement, profit sharing, or other employee benefit plan during the marriage, the part that was accumulated during the marriage it is community property and subject to division in the dissolution. (If the owner of the benefits contributed to the plan before marriage or after separation, those amounts aren’t included in the division.) The spouse who owns the retirement plan can pay the other spouse for the non-owner spouse’s share of the community interest, or the court can reserve jurisdiction to have each spouse receive a proportionate share of the benefits when they are paid.
Estate Planning Complications due to Community Property
Although the definitions of community property and separate property may seem clear, court decisions have changed community property statutory law. The courts tend to favor community property over separate property, and there are several ways that separate property can be determined to be all or part community property. If separate property is mixed with similar community property, it may not be possible to identify which is which many years later. An example would be bringing a separate property bank account into a marriage, and then depositing the funds into a community bank account. However, tracing of assets is often used to substantiate separate property claims. Community payments to improve or maintain separate property. If a spouse brings a separate property house into a marriage, and then uses his or her monthly salary to pay the mortgage, the courts will determine that part of the house has become community property explains LA Probate Law. The percentage of the community interest will depend on the number of mortgage payments, and how much the value of the house changed during that period. Likewise, using community assets to pay property taxes, insurance, and repairs can also give the community a claim to part of the house. Generally, income from a separate property asset is separate property. However, if a spouse brings a business into a marriage and then works full time at the business, the courts can determine that the income from the business is community property. For example, a spouse owns a restaurant before marriage, gets married, and continues to work at the restaurant 12 hours a day. The income from the restaurant will most likely be considered community property.
LA Probate Law on Community Property
Latest posts by Scott Schomer, Estate Planning Attorney (see all)
- Many Reasons to Plan - July 8, 2019
- Use Resources Efficiently With a Special Needs Trust - July 7, 2019
- Business Structures That Provide Asset Protection - July 6, 2019