COMMUNITY PROPERTY STATES VERSES COMMON LAW PROPERTY STATES

Fall 2000 volume 3/number 1

11.1.2000

There are two different systems for classifying marital property in the
United States: the common law property system and the community property
system. Most states, including Connecticut and New York, utilize the
common law property system. Under this system, property acquired by a
married person during marriage is the property of that person
separately, unless the person agrees with his or her spouse to hold the
property jointly. By contrast, 10 states are community property states
-- Arizona, California, Idaho, New Mexico, Louisiana, Washington,
Nevada, Texas, Wisconsin, and Alaska. Generally speaking, under the
community property system, property acquired by either spouse while
married becomes community property. Property acquired before marriage,
as well as property inherited or received as a gift during a marriage,
is generally considered the separate property of the recipient spouse.
 
Whether property is classified as community property or as common law
property affects rights of ownership, rights to income from property,
rights and duties of management and control, rights to make lifetime
gifts, property rights in the event of divorce, and rights to dispose of
property at death.
 
Moving from a Common Law State to a Community Property State
Community property states have different systems for treating the property of
spouses who have migrated from common law states. Usually, assets
acquired in community property states are community property, and assets
acquired in common law states are separate property. However, some
community property states, such as California, have a system of
quasi-community property, which converts into community property any
property that would have been community property had it been acquired in
that state. Other community property states, such as Texas, do not
change the classification of property that was acquired while living
elsewhere.
 
Whether or not a community property state reclassifies property acquired
elsewhere may be of great significance, especially with respect to a
spouse who does not work or otherwise have financial assets. Because
property acquired by the working spouse is considered separate property
in common law states, most common law states have statutes providing for
an elective or forced share in a deceased spouse's estate to protect a
non-working spouse from being involuntarily divested of all property
acquired during a marriage. When a couple moves to a state like
California, the property acquired by the working spouse becomes
quasi-community property, and the non-working spouse is entitled to half
of each asset of the deceased spouse's estate. This system protects the
non-working spouse who moves from a common law state. In moving to a
state like Texas, however, the classification of property acquired by
the working spouse does not change, even though Texas does not have
statutes to protect the non-working spouse from being divested of
property acquired during the marriage. Thus, in such a case, if the
working spouse died, the non-working spouse would have no statutory
right to claim property acquired by the deceased spouse prior to the
relocation and could be disinherited under the deceased spouse's will.
 
Other Differences Among Community Property States. Community property
rules differ in other ways. For example, in some states, income from
separate property is separate property, while in other states, income
from separate property becomes community property. States with
quasi-community property systems also disagree as to whether the
non-working spouse is entitled to one-half of the value of the total
quasi-community property or to one-half of each asset.
 
Moving from a Community Property State to a Common Law State.
Generally, common law states treat property acquired during marriage in a
community property state as jointly-held property in which each spouse has an
undivided one-half interest. However, to the extent the common law state
also has an elective or forced share statutory right in a surviving
spouse, that right usually will not extend to the undivided one-half
interest deemed to be owned by the deceased spouse.
 
Given the significant differences between community property states and
common law states, it is important to understand how a state's
particular system will affect you before you move. It is also important
to find out to what extent the state law system can be overridden by the
provisions of a properly executed will or other testamentary
disposition.
NEW HAVEN   |   STAMFORD   |   NEW YORK   |   HARTFORD   |   PHILADELPHIA   |   GREENWICH
© 1998-2014 Wiggin and Dana LLP   |   Disclaimer Notice   |   Attorney Advertisement   |   Privacy Policy   |   Contact
wiggin.com
© 1998-2014 Wiggin and Dana LLP