Community Property Vs. Non-Community Property
In the United States there are two different types of marital property laws: community property and common law property. The nine states in the U.S. that recognize community property law are: Arizona, California, Idaho, Louisiana, Nevada, New Mexico, Texas, Washington and Wisconsin. All other states recognize a common law system.
In community property states, spouses share ownership of most property. The basic rule of community property is: during a marriage, all property earned or acquired by either spouse during that marriage is owned 50% by each spouse – except property received through a gift or an inheritance which was received as a "separate property." In community property states, property owned by one spouse before a marriage remains separate property, even after marriage only if it's kept separate.
Example: Levi Smith owned a home for five years before marrying Emily. He then signed a new deed for a house, listing "Levi and Emily Smith" as community property owners. Levi has given one-half ownership of the house to Emily.
A common mistake of transformation of separate property is when it gets commingled with community property and it's no longer possible to tell the difference between the two.
Example: When she got married, Ginger had a bank account with $40,000 in it, her separate property. During the 25 year marriage, she maintained this account adding money her husband earned and made no withdrawals. The original $40,000 has long since been commingled with community property funds and is no longer considered separate property.
In contrast, common law states that property acquired by one spouse belongs 100% to that spouse unless the property is specifically put in the names of both spouses.
Another simple example to distinguish the two: under the common law property system, if a married man purchases a motorcycle and puts only his name on the title, that motorcycle belongs solely to him. If the man lived in a community property state, however, the motorcycle would automatically become the property of both the man and his wife.
The main advantage to community property is the surviving spouse gets a full step-up in basis in the entire property if at least one-half of the whole property is includible in the deceased spouse's gross estate.
Personal FinanceIn breakup, divorce or death, community or common law will determine how property is divided.
InvestingIf you can't afford property close to home, consider taking the real estate plunge elsewhere in the country.
TaxesUnderstanding how property taxes work will ensure that you won't be overcharged.
TaxesBeing a landlord can be taxing, especially when you want to sell. Find out how to reduce your burden.
InvestingAnyone involved in a real transaction can benefit from gaining a basic understanding of the different methods of real estate valuation.
TaxesIf your home or second home is not in the United States, you can still get U.S. tax deductions. How many and what kind depends on whether you also rent it.
InvestingReal estate owned properties present a unique investment opportunity but there are some specific challenges to be aware of before diving in.
InvestingFind out how best to claim and convey ownership on your assets.
InvestingIt's a bit tricky, but a valuable tool to make your investment pay off.
InvestingForeclosed homes may be financially appealing, but there are many obstacles to consider before buying.