Legal Definitions - community property

Community property is a legal concept recognized in certain states that defines how assets and debts acquired by a married couple are owned. In a community property state, any income earned, property purchased, or debt incurred by either spouse during the marriage is generally considered to be owned equally by both spouses, regardless of whose name is on the paycheck, title, or loan agreement. Each spouse typically holds a 50% interest in these marital assets and liabilities. However, gifts or inheritances received by only one spouse are usually considered that spouse's separate property and are not part of the community property.

• Example 1: Marital Income and Savings

  Sarah and Tom get married in California, a community property state. Sarah works as a software engineer, earning a substantial salary, while Tom works part-time as a freelance graphic designer. They deposit all their earnings into a joint savings account. Under community property laws, all the income Sarah and Tom earn during their marriage, as well as the money accumulated in their savings account, is considered community property. This means that even though Sarah earns more, both she and Tom equally own all the money earned and saved during their marriage.

• Example 2: Real Estate Acquisition

  After moving to Texas, another community property state, Maria and David decide to buy a house together. They use a down payment from David's pre-marital savings, but the mortgage payments are made from their combined salaries earned during the marriage. Even if the deed to the house is initially placed only in David's name, the portion of the house acquired and paid for during the marriage using marital funds would be considered community property. Both Maria and David would have an equal ownership interest in that marital portion of the home.

• Example 3: Shared Debt

  In Arizona, a community property state, Lisa decides to purchase a new car for family use during her marriage to Mark. She takes out a car loan solely in her name. Despite Mark not being a signatory on the loan agreement, the debt incurred for the car is considered community debt because it was taken out during the marriage for a community purpose. Consequently, both Lisa and Mark are equally responsible for repaying the car loan under Arizona's community property laws.