Understanding Community Property vs Separate Property

This article explains the concepts of Community Property and Separate Property, their significance in marital property ownership, and how they influence Trust creation in different states.

You can also check out our Learn Center for an in-depth guide about this topic: Estate Planning for Community Property vs Separate Property

What is Community Property?

Community Property is a legal form of joint property ownership typically applied to assets owned by married couples. This concept is recognized in select states and entails that each spouse has an equal ownership interest in property acquired during the marriage. Notably, this holds true even if only one spouse's name appears on the title.

Key Features of Community Property

  • Shared Ownership: Assets earned or acquired by either spouse during the marriage are considered Community Property. This includes income generated by either spouse.
  • Asset Acquisition: Assets purchased with Community Property income, such as a residential home, are also considered Community Property, regardless of whose name is on the title.

Community Property States in the US

Community Property laws are recognized in Arizona, California, Louisiana, Nevada, New Mexico, Texas, Washington, and Wisconsin. Alaska offers an "opt-in" arrangement for couples wishing to classify their property as Community Property.

Joint Trusts in Community Property States

With Trust & Will's Trust-based Estate Plan, any trust for a married couple will be a Joint Trust in Community Property states. We feel this is the best option as it provides significant benefits from a tax and legal perspective, and more closely matches the way laws are set up in your state.

We do not have an option for a married person to create a separate Trust in a community property state.

What is Separate Property?

Separate Property is a legal term used in some states to describe assets that belong to just one spouse, not both. This typically means if you own something before you get married, or if someone gives you a gift or leaves you something in their will, it's considered yours alone, even if you're married.

Separate Property States

Separate Property laws are recognized in Alabama, Alaska, Arkansas, Colorado, Connecticut, Delaware, Florida, Georgia, Hawaii, Idaho, Illinois, Indiana, Iowa, Kansas, Kentucky, Maine, Maryland, Massachusetts, Michigan, Minnesota, Mississippi, Missouri, Montana, Nebraska, New Hampshire, New Jersey, New York, North Carolina, North Dakota, Ohio, Oklahoma, Oregon, Pennsylvania, Rhode Island, South Carolina, South Dakota, Tennessee, Utah, Vermont, Virginia, West Virginia, and Wyoming.

Trust Options for Separate Property States

With Trust & Will's Trust-based Estate Plan, married couples can create mirror-image Trusts, naming each other as Successor Trustees, which provides a similar long-term outcome to Joint Trusts but with the aforementioned benefits. We also provide the option for married couples to create a Joint Trust in Separate Property states.

Related Articles

Understanding Joint and Separate Trusts for Married Couples

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