Creating Community Property: Law's Role And Reach

Community property refers to the legal treatment of possessions of married people as belonging to both of them. In the United States, the community property system is justified by the recognition that joint ownership acknowledges the equal contributions of both spouses to the creation and operation of the family unit. In some states, such as California, Alaska, Tennessee, South Dakota, Kentucky and Florida, spouses may agree to hold some or all marital property in common by creating a community property trust or community property agreement. However, the U.S. Supreme Court has ruled that such statutes will not be recognised for federal income tax reporting purposes.

Joint ownership

Community property is a legal treatment of the possessions of married people as belonging to both of them. It is based on the recognition that joint ownership reflects the theoretically equal contributions of both spouses to the creation and operation of the family unit. In other words, it treats the property like the assets of a business partnership.

In the US, joint ownership is automatically presumed by law unless there is specific evidence to the contrary for a particular piece of property. Property owned by one spouse before the marriage is sometimes referred to as the "separate property" of that spouse. However, there are instances in which the community can gain an interest in separate property and even situations in which separate property can be "transmuted" into community property. For example, Alaska, Tennessee, South Dakota, Kentucky, and Florida have optional community property systems, in which spouses may agree to hold some or all marital property in common by creating a community property trust or community property agreement.

Separate property

Community property is a legal treatment of the possessions of married people as belonging to both of them. Generally, all property acquired through the efforts of either spouse during the marriage is considered community property. The law treats this property like the assets of a business partnership.

However, property owned by one spouse before the marriage is sometimes referred to as the "separate property" of that spouse. There are instances in which the community can gain an interest in separate property and even situations in which separate property can be "transmuted" into community property. For example, in California, quasi-community property is defined by statute as all real or personal property, wherever situated, acquired before or after the operative date of this code in any of the following ways: by either spouse while domiciled elsewhere, which would have been community property.

The community property system is usually justified by the pragmatic recognition that such joint ownership recognizes the theoretically equal contributions of both spouses to the creation and operation of the family unit, a basic component of civil society.

Alaska, Tennessee, South Dakota, Kentucky, and Florida have optional community property systems, in which spouses may agree to hold some or all marital property in common by creating a community property trust or community property agreement. Puerto Rico also allows the property to be held as community property, as do several Native American jurisdictions.

Quasi-community property

Community property is the legal treatment of the possessions of married people as belonging to both of them. Generally, all property acquired through the efforts of either spouse during the marriage is considered community property. The law treats this property like the assets of a business partnership. The community property system is usually justified by the pragmatic recognition that such joint ownership recognises the theoretically equal contributions of both spouses to the creation and operation of the family unit, a basic component of civil society.

In the United States, there are several states that have an optional community property system, in which spouses may agree to hold some or all marital property in common by creating a community property trust or community property agreement. These states include Alaska, Tennessee, South Dakota, Kentucky and Florida. Puerto Rico also allows the property to be held as community property, as do several Native American jurisdictions.

In California, quasi-community property is defined by statute as all real or personal property, wherever situated, acquired before or after the operative date of this code. This includes property acquired by either spouse while domiciled elsewhere which would have been community property.

The U.S. Supreme Court ruled that a similar statute allowing spouses to elect a community property system under Oklahoma law would not be recognised for federal income tax reporting purposes. This ruling, known as the Harmon decision, also applies to the Alaska, Florida, Kentucky, and Tennessee systems for income reporting purposes.

Community property trusts

Community property is the legal treatment of the possessions of married people as belonging to both of them. The community property system is usually justified by the pragmatic recognition that such joint ownership recognises the theoretically equal contributions of both spouses to the creation and operation of the family unit, a basic component of civil society. The law treats this property like the assets of a business partnership.

Alaska, Tennessee, South Dakota, Kentucky and Florida have community property systems. In these states, spouses may agree to hold some or all marital property in common by creating a community property trust or community property agreement. However, it is important to understand the tax and legal consequences before proceeding. For example, the U.S. Supreme Court ruled that a similar statute allowing spouses to elect a community property system under Oklahoma law would not be recognised for federal income tax reporting purposes. This ruling also applies to the Alaska, Florida, Kentucky, and Tennessee systems for income reporting purposes.

Property owned by one spouse before the marriage is sometimes referred to as the "separate property" of that spouse. However, there are instances in which the community can gain an interest in separate property and even situations in which separate property can be "transmuted" into community property.

The history of marital property law shows a gradual spread of the community-property system. In ancient Rome—except for one period—wives had few property rights; whatever was theirs became their husbands’ upon marriage. In the European Middle Ages, parts of Spain, France, and Germany had copartnership-in-acquisition systems, which are thought to have originated among the Germanic tribes and to have been carried to Spain and France by the Goths and Franks.

Community property agreements

In the United States, there are several states that have community property systems in place. For example, Alaska has an optional community property system, in which spouses may agree to hold some or all marital property in common by creating a community property trust or community property agreement. Tennessee, South Dakota, Kentucky and Florida have similar systems. Florida's publication of Chapter 736 on July 16, 2021, outlines strong disclaimers regarding establishing a community property trust.

Puerto Rico also allows the property to be held as community property, as do several Native American jurisdictions. In California, quasi-community property is defined by statute as all real or personal property, wherever situated, acquired before or after the operative date of this code.

Property owned by one spouse before the marriage is sometimes referred to as the "separate property" of that spouse. However, there are instances in which the community can gain an interest in separate property and even situations in which separate property can be "transmuted" into community property.

Frequently asked questions