"Community property" is a type of joint ownership of property between married couples that is recognized in the following states: Arizona, California, Idaho, Louisiana, Nevada, New Mexico, Texas, Washington, and Wisconsin. In Alaska, married couples can elect to have some or all of their property treated as community property by stating so in a written contract.
What Does Community Property Include?
While the laws in community property states vary, community property generally means that all assets purchased by a married couple with assets earned during the marriage are owned equally by the husband and wife regardless of how it's titled (unless it's acquired by gift or inheritance), and all debts are incurred equally. This is contrasted with "separate property" states where spouses can show their proportionate ownership of property by tracing contributions, and property owned in one spouse's sole name is presumed to be that spouse's own separate property.
Community Property and Divorce
When a couple who lives in a community property state divorces, in general each spouse will receive an equal share of the community property, and each spouse will be responsible for an equal share of any marital debts. However, divorce laws vary widely within the community property states, so consult with an attorney who practices in your state if you want to know the exact rules. This is contrasted with separate property states where the property is "equitably" divided between the divorcing spouses based upon their contributions, and debts are also apportioned between spouses.
Community Property and Death
What happens to community property when one spouse dies? If the couple didn't make an estate plan, then the intestacy laws of the state where they lived will govern who gets what. These laws tend to vary greatly in community property states. For instance, in Texas, if the couple had children together, then the surviving spouse will inherit all of the community property. But if the spouse who died had children from a prior marriage, then the deceased spouse's children will receive their parent's 50% share of the community property and the surviving spouse will only keep their 50% share. Of course, all of this can be changed by the couple making an estate plan, the terms of which will trump the community property laws of their state.