What is Community Property and How Might it Affect Me in Separation?

Community Property Concepts

The concept of community property traces its origins to the civil laws of Mexico and Spain. When Arizona was first settled by Americans, they found Mexican and Spanish settlers already here. It is from the Mexican and Spanish settlers that the community property concept was adopted.

The law of community property exists in only nine states: Arizona, California, Idaho, Louisiana, Nevada, New Mexico, Texas, Washington, and Wisconsin. (The other 41 states have different forms of ownership concepts.) Even among the nine community property states, however, the laws relating to com­munity property vary widely.

Community property is a theory of property ownership by the marital community itself, as opposed to ownership by either spouse individually. The foundation of the community property concept is a valid marriage. There is no community and, thus no community property, without a valid marriage. If a marriage was valid where it was contracted, so long as it is not void or prohibited under Arizona law, it is valid in Arizona.

Illustration: A man and a woman contracted a valid common law marriage in another state, and then moved to Arizona. Even though Arizona does not allow or recognize common law marriages contracted within the state, it will recognize a valid common law marriage contracted in another state. Thus, this hypothetical couple’s common law marriage will be valid in Arizona, and community property concepts will apply.

Community vs. Separate Property

Under the community property law of Arizona, each spouse owns an undivided and indivisible one-half interest in all community property. (This may be good news for some readers, who may have moved to Arizona from one of the 41 states that do not have community property laws.) The interest of each spouse remains undivided until the commu­nity is dissolved.

All property acquired by either husband or wife during the marriage, except that which is acquired by gift or inheritance, is the community property of the husband and wife. The incomes of both the husband and the wife during the mar­riage, in the absence of an agreement to the contrary, become community property. All property saved or purchased out of the parties’ salaries or wages likewise becomes community property. Gifts to the community are also community prop­erty. The way in which property is titled does not determine whether it is community property. There is a strong presump­tion in the law that all property acquired during marriage is community property.

Not all property of a husband or wife is necessarily com­munity property, however. For instance, any property owned by a spouse before marriage, as well as any property which is acquired by gift or inheritance afterward, is the separate property of that spouse. The income and gains from separate property are also separate property. Property that spouses agree shall be separate is separate property, and property that one spouse gives to the other intending it to be separate property is separate property. In some cases, the spouses agree in a prenuptial agreement that certain property will be separate property, even if that same property would otherwise be community property.

Separate property can be changed into community property by agreement, gift, or by mixing it with community property. Separate funds commingled with the community funds may lose their identity as separate property, because when commingling occurs the property is presumed to be community. In such cases, it becomes a matter of proving the nature of the property. If the separate property can be identi­fied, commingling will have no effect.

Dissolution of the Community

The community is dissolved, and thus the community property form of ownership ceases, upon the happening of one of these three events:

1. service of a petition for dissolution of marriage, legal separation, or annulment, if the petition results in a decree
2. the death of one spouse
3. the execution of a separation agreement by the spouses.

The community property is divided and distributed differently in each case, as explained below.

Dissolution of marriage, legal separation, or annulment. In an action for dissolution of marriage or legal separation, the court has the power to divide the community property equitably, and to confirm to each spouse his or her separate property. The terms of the decree will control the dis­tribution of the property. Under certain circumstances, the court may order an unequal division of the community prop­erty. In an action for annulment, by comparison, the marriage is deemed never to have existed and, accordingly, there is no community property to divide.

Death of a spouse. When one spouse dies, the deceased spouse’s estate is made up of his one-half interest in the com­munity property and all of his separate property. The deceased spouse’s property will pass according to the terms of his will, or if he did not have a will, by the laws of intestate succession.

Agreement by the spouses. The last way to dissolve the com­munity is by mutual agreement of the spouses. The spouses have the power to enter into a separation or property settle­ment agreement dividing the community property between them. Upon the execution of such an agreement, the property is owned by the spouses as separate property or in some other non-community form.