Community versus Separate Property 

In California, as in many other states, the distinction between community property and separate property is significant in various legal matters, including divorce, property division, and estate planning. As a Folsom attorney who specializes in estate planning, I have found that this distinction is important for married couples for a variety of reasons. Here’s an overview of community property and separate property in California:

Community Property:

1. Definition: Community property typically refers to assets and income acquired by either spouse during the marriage.
2. Ownership: Both spouses have equal ownership rights to marital property acquired during the marriage, regardless of who earned the income or whose name is on the title.
3. Division in Divorce: In the event of divorce or legal separation, California follows the principle of an equal 50/50 split for spouses for any and all community property. This law is not always seen as “fair” or “just” with respect to all parties involved, but it is the longstanding law of California. Other states, such as Oregon, use equitable distribution principles, meaning that marital property is divided fairly and equitably between the spouses. It does not necessarily mean a 50-50 split, but rather a division that is just and proper based on various factors, including the financial circumstances of each spouse.
4. Examples: Examples of marital property include income earned during the marriage, real estate acquired during the marriage, joint bank accounts, retirement benefits accrued during the marriage, and other assets obtained while married.

Separate Property:

1. Definition: Separate property includes assets and income that are not considered marital property. These are typically assets acquired by one spouse before the marriage, assets received as gifts or inheritances during the marriage (if kept separate), and any property that the spouses agree to keep separate through a valid prenuptial or postnuptial agreement.
2. Ownership: The spouse who owns separate property maintains sole ownership of it, and it is generally not subject to division in the event of divorce.
3. Exceptions: Keep in mind that commingling separate property with marital property can sometimes change its characterization. For example, if separate funds are deposited into a joint bank account, those funds may become marital property.
4. Examples: Examples of separate property include assets owned before marriage, inheritances received individually, gifts made specifically to one spouse, and any property kept separate through a valid legal agreement.

Community versus Separate Property as it Relates to Estate Planning:

1. When designing an estate plan for married clients, it is crucial to understand what the clients wishes are for their assets upon their passing. As such, it is important to understand what assets are separate property and which are marital property. 
2. After delineating how the asset is classified, we can then determine how to title and potentially modify the asset so that it flows to the intended beneficiary without any legal or administrative difficulties. Furthermore, if property is classified as separate property, it is possible to gift the property, or a portion of it, to the other spouse so as to not have any property classified as such. 

Conclusion

It’s essential to understand the distinction between community property and separate property in California, as it can have a significant impact on divorce proceedings, property division, and estate planning. If you have specific questions about property ownership and classification in your situation, it’s advisable to consult with an experienced Folsom attorney who specializes in estate planning. If you have questions about community versus separate property as it relates to estate planning, please contact Thapar Law at 916-579-0605 or send us a message.