Community property includes all assets purchased by a married couple. A husband and wife own assets earned during the marriage equally. However, assets acquired by gift or inheritance cannot be included as community property.
When a couple living in a community property state divorce, each spouse will receive an equal share of the property and will have equal liability over marital debts[i]. When a divorce occurs, community property dissolves because no spouse is contributing to the community property after separation[ii]. After a divorce decree, the community property should be divided among the couples equally.
When a marriage is dissolved by divorce the property that was community property becomes property of both spouses in equitable proportions[iii].
The Uniform Marital Property Act provides that after dissolution of a marriage each former spouse owns an undivided one-half interest in the former marital property. Statutes provide that a person’s earnings after an interlocutory judgment of divorce and while the parties are living separate will form separate property. When a property is acquired after getting an interlocutory order of divorce, such property will be considered separate property. This is because when the spouses live separate after the order the other spouse does not contribute to the acquisition of the property. Therefore, the property cannot be considered as community property because it is not acquired by the joint efforts of the spouses. Courts appoint receiver to decide appropriately on the community property of spouses in divorce cases.
Even after separation by divorce when community property is not separated, it becomes the common property of both the parties[iv]. They will have similar status as tenants in common. If there is any oral undisclosed agreement regarding community property between spouses, it will not be considered as valid by courts. An oral agreement is against public policy and such an agreement does not create any rights for either spouses. Partition of the property will be the only effectual remedy in a post-divorce division of property.
Generally, community property is disposed of by the court that grants divorce. The power to dispose of community property can be exercised by other courts in an independent action in a case of fraud, or when the property is within the jurisdiction of the court. However, when a person waived right to bring the property rights for adjudication before a court, the person cannot maintain an independent case for adjudicating the same right.
In some states, when a community property right is not presented along with the pleadings for divorce, it can be brought as an independent action. The case can also be brought in a state other than which the party was divorced. It will not be considered as a delay if a spouse comes to know about the community property later.
In some states in the U.S., the rights to community property of couples are dissolved on a retroactive basis from the date the petition for separation was filed. Even if the community is terminated from a prior date, the spouses will get the net value of the property equally as according to the value of the property at the time of apportionment. All the community property and separate property of the divorced parties will be brought before the court at the time of distribution.
The community debts of spouses over properties cannot be allocated by divorce decree[v]. There should be a judgment describing the allocation of joint liability of the parties. All the community property is subject to the joint loans and debts before allocation[vi].
[i] Commonwealth v. Hillman, 189 Pa. 548 (Pa. 1899)
[ii] In re Geraldine D. Lark & John S. Lark, 2002 Cal. App. Unpub. LEXIS 6482 (Cal. App. 2d Dist. July 15, 2002)
[iii] Lack v. Lack, 584 S.W.2d 896 (Tex. Civ. App. Dallas 1979)
[iv] Sears v. Rusden, 39 Wn.2d 412 (Wash. 1951)
[v] Fischer v. Sommer, 160 Ariz. 530 (Ariz. Ct. App. 1989)
[vi] Sapirie v. Collins, 70 Ind. App. 529 (Ind. Ct. App. 1919)