Question: What is community property? I am married and live in Arizona. Does this affect me?
Answer: Married individuals living in community property states own property their property as either community property or separate property. Community property is all property acquired during marriage, except property acquired by gift or inheritance, or property acquired after the service of a petition for divorce, legal separation or annulment if the petition results in a decree of divorce, legal separation or annulment. A.R.S. § 25-211. Separate property is all real and personal property owned by an individual before marriage. Separate property is also property acquired during the marriage by gift or inheritance, or property acquired during the marriage, but after the service of a petition for divorce, legal separation or annulment provided that the petition results in a decree of divorce, legal separation or annulment. A.R.S. § 25-213.
If you are married and live in Arizona, the rules regarding community property and separate property apply to you. Nine other U.S. states have community property laws including California, Idaho, Louisiana, New Mexico, Texas, Washington and Wisconsin. Puerto Rico also has community property laws.
A few practical examples:
Did you own property before you got married and that property is still in your name only? If so, that property is probably your separate property. However, things can get tricky if you use your salary (a community asset) to improve the separate property (for example, using your salary to make improvements on your separate property rental property).
You are married and inherited money from your parents. Does your spouse have any claim to this money? If you keep it separate from the property you own with your spouse, no. The best way to do this would be to put it in a bank account in your name only. But, if you deposit the money into your joint checking account, you’ve just turned your separate property asset into community property.
You are in the process of getting a divorce when you start a new business. Is your business community property or separate property? As long as the divorce proceedings had been started before you started your business and the divorce proceedings actually ended in a divorce, your business should be your separate property.