Legal Definitions - community-property state

A community-property state is a jurisdiction where most assets and debts acquired by a married couple during their marriage are considered jointly owned by both spouses, typically in equal shares. This means that property obtained by either spouse from the date of marriage until its dissolution (e.g., through divorce or death) is generally presumed to belong to both partners equally, regardless of whose name is on the title or who earned the income. However, assets received by one spouse as a personal gift or through inheritance are usually excluded from community property and remain that spouse's separate property.

Here are some examples to illustrate how this concept applies:

• Example 1: The Family Home and Income
  Sarah and Tom marry in California, which is a community-property state. During their marriage, Sarah works as an engineer, and Tom works as a teacher. They use their combined salaries to purchase a house, save money in a joint bank account, and buy a car. In a community-property state like California, the house, the money in their joint account, and the car are all considered community property. This is because these assets were acquired using income earned during their marriage. Even if Sarah earned more than Tom, or if the house title was only in one name, the law presumes equal ownership by both spouses.

• Example 2: Business Ventures
  Maria and David are married in Texas, another community-property state. During their marriage, David starts a successful software company. He uses his time, effort, and some initial capital saved from his salary earned during the marriage to build the business. Because David's software company was founded and grew during his marriage to Maria, the business itself, and the profits it generates, would typically be considered community property. Maria would have an equal ownership interest in the company, even if she wasn't directly involved in its day-to-day operations, because it was an asset acquired and developed within the marital community.

• Example 3: Gifts and Inheritances vs. Earned Income
  In Arizona, a community-property state, Emily receives a significant inheritance from her grandmother's estate during her marriage to Mark. Later that year, Mark receives a large bonus from his employer. Emily's inheritance would generally be considered her separate property because it was a gift received individually, not earned through marital effort. However, Mark's bonus, being income earned from his employment during the marriage, would be classified as community property, meaning both he and Emily would have an equal claim to it. This illustrates the distinction between individually received gifts/inheritances and income earned during the marriage.