I am writing this blog post to give a little more information about community property and separate property. These differences will explain why it is important to have a will or a trust in place.
California is a community property state. This means that there are default rules imposed upon married couples in terms of their property and how it is handled at death or divorce. Community property is property (or debt) that was acquired from the date of the marriage until the date of separation (excluding certain gifts, bequests, and inheritances that were specifically meant for one of the partners in the couple). Examples of community property include wages, a house that was bought using those wages, and 401k retirement accounts.
Separate property is property (or debt) that was acquired before the date of the marriage and after the date of separation. It also includes certain property that was given to one specific spouse.
Even though there are defining characteristics of each type of property, sorting them out is not always simple. For example, if you buy a house when you are married, but both of you use money from wages earned before the date of marriage- this house cannot simply be placed in a community property category because separate property funds were involved in its purchase.
Why does this matter?
It matters because the default rules in California will control how your property is handled at divorce and at your death.
For example, a husband in a relationship called our office for help because his wife passed away, leaving behind a home that was entirely in her name because it was hers before the marriage. She did not have children, nor did she have parents that were still alive. All her siblings had also passed away, but she had nieces and nephews that were unknown to her and to her husband. Because the relatives are still alive, the law states that the mobile home partially should be inherited by them. The husband had to sell the home he lived in for years to give these strangers (to him and to her) a portion of the estate. Sounds like an unfair result, but that is what the law states should happen.
If you die intestate (without a will or without a trust), then there are default rules about how your property is handled. If you pass away and you are legally married, your spouse will obtain a portion of this property. Now, for some people this is not a problem. They want their spouse to inherit a portion of their property! However, for other people this is not what they would wish at all. Take, for example, a situation where the spouses have been separated for a number of years. They never got around to filing their divorce documents, and neither of them have a will. However, both of them have found new partners and are living with the other partner in a non-marital situation. When one of those spouses dies, the other spouse would have a claim to the estate and the new partner would not. Not exactly a result that is ideal!
So how do you avoid this? Well, there are a couple of ways – get a divorce. Once a divorce judgment is entered, the marriage is officially over, and the spouses are not able to inherit from one another. Another way that this could possibly be avoided is to draft a will or create a trust. These documents change the way that the property is distributed, and they make sure that your possessions are distributed to the people that you want to have them at your death. You can read more about drafting a will or creating a trust on my blog!
In conclusion, having a trust or a will ensures that your wishes about your property will be followed.
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