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Community vs. Separate Property in Prenuptial Agreements

Community vs. separate property

Having a good understanding of what distinguishes community from separate property, whether entering a marriage with or without a prenuptial agreement, can be a very important factor if you ever end up in a divorce.

When it comes to property laws, separate property refers to property owned by one person only whereas community property is property considered to be owned by both individuals in the marriage. So, why is this important going into a marriage?

If you live in a state that recognizes community property laws, then in general, most property that is acquired during the marriage is considered to be jointly owned by you and your spouse. Thus, if you get married and purchase two cars and a home, these would likely be considered to be owned by both parties equally…regardless of whether or not it was paid for by one or both parties.  If you live in a state that doesn’t recognize community property laws, the general presumption is that the person whose name is on the deed or registration is the owner of the property.

When it comes to community property states, there are also some common exceptions to property being considered jointly owned. These exceptions usually apply to property that was owned prior to and brought into the marriage and gifts or inheritances that are received during the course of the marriage. Absent these exceptions or there is specific evidence to the contrary, all property and assets will be considered to be jointly owned, thus community property.

Currently, community property states include:

  • Arizona
  • California
  • Idaho
  • Louisiana
  • Nevada
  • New Mexico
  • Texas
  • Washington
  • Wisconsin

Whether you reside in a community or separate property state, having a prenuptial agreement lets you set the rules related to how the marital property will be divided in a divorce. This can be especially important when parties enter the marriage with separate property. During a divorce, sometimes separate property can be confused and misclassified as joint property. This usually occurs when the spouse’s finances are together and payments for property are made out of those joint funds. Having the prenup can help avoid these issues.