When married people start estate planning, they may learn for the first time about the concept of community property. It also comes up during divorces. Community property is important in estate planning because when one spouse passes away, the other automatically owns the couple’s community property. The executor or administrator will distribute any separate property of the deceased person to his heirs as listed in his will. Knowing which property is likely classified as separate can help you make decisions about who will inherit.
Community property is the assets that spouses own together. Only spouses and people in domestic partnerships have community property, not unmarried people. Everything that you and your spouse bought while you were married is probably community property unless it was a gift or inheritance received by only one of you. Community property also includes debt incurred by one of the spouses during the marriage.
When spouses earn money, that money (and anything they buy with it) is part of their community property. It does not matter if only one of the spouses contributed to purchase an item, because it was purchased during the marriage. Each spouse owns half of the community property, including half of the debt. If one spouse is deceased, the surviving spouse automatically gets the deceased spouse’s half of the community property.
Anything that is not community property is separate property. This usually includes gifts and inheritances to just one spouse and any assets each spouse had before the marriage. Any income made from separate property or property purchased with separate funds are also separate property. In addition, some couples will own some quasi-community property, which is property acquired when they lived in another state that would have been community property had they lived in California at the time.
Sometimes, spouses commingle or mix community and separate property so that it can be complicated to figure out who inherits what when one spouse passes away. This could create disputes with other inheriting relatives who believe that they have not received everything listed in the will. People who own a significant amount of separate property or separate property with a high value should speak to an estate planning attorney to make sure their wills follow legal requirements. The attorney can make sure that the will is as specific as possible about who will inherit what.
Planning your estate? Look to Janet Brewer, Esq. for thorough and thoughtful estate planning advice. Janet’s more than 20 years of legal experience will give you confidence and peace of mind. To schedule a “Get Acquainted” meeting, visit Janet's website or call her office at (650) 469-8206.