Every property owned or acquired by the spouses during the marriage except separate property is deemed to be community property. Separate property is that property which is owned by either of the spouses individually in addition to anything that either spouse acquires by inheritance during the marriage. The property that each partner brings into the marriage or receives by gift, bequest or devise during marriage is considered separate property. Generally, earnings, damages obtained from a personal injury suit, damages awarded in an industrial accident action, and rents and profits from separate property comes under the purview of community property.
Community Property Law determines the distribution of community property in the event of the end of the marriage, whether by judicial separation or death of one of the parties. The distribution of community property varies from state to state. However, most states recognize that a husband and wife each acquire a one-half interest in the community property. Courts generally determine whether a particular asset is community property or separate property on the basis of the time of acquisition of such property.
Therefore, property acquired by either spouse before marriage or after entry of a decree of dissolution of marriage is separate property[i]. While determining the character of the property, courts generally look into the rules of law to the facts surrounding the acquisition of the property.
Also, the intent of the parties to keep the property as separate is also material. For instance, “when a spouse uses separate property to acquire property during marriage and takes title to that property in the name of both spouses, a presumption arises that the purchasing spouse intended to make a gift of one-half of the separate funds to the other spouse”[ii]. Absent evidence of gift or transmutation, the character of all property acquired during marriage is presumed to be community property[iii].
Since the general presumption is that all property acquired during the course of a marriage is community property, the burden of proving that the property is separate falls on the party alleging it. The party who claims that the property is separate shall prove “with reasonable certainty and particularity” that the property is owned separately by one spouse[iv]. This may be done by establishing that the property was acquired by one spouse prior to the marriage, by tracing the funds used to acquire the asset to a separate property source, or by showing that the property was acquired by gift, bequest or devise during the marriage[v]. Further, the presumption is in favour of communal ownership and hence where the source of an asset is not known or cannot be proved, courts will treat such property as community property even though no evidence exists as to its community nature. Also, a debt due a deceased spouse, which existed prior to the marriage of the parties, is considered as separate property[vi].
The nature and character of separate property does not change simply on commingling with community property[vii]. A property is properly regarded as community owned “only when the community and separate funds are mingled in the initial acquisition, or when separate funds are commingled with community funds indiscriminately so that the separate funds cannot be identified or differentiated from the community funds[viii].”
If the separate property is inextricably commingled with community property, such property becomes community property.
The principle of estoppel is not strictly applied to spouses in the matter of determination of character of the property. Thus, if a spouse concurs in a declaration in an acquisition that the property is acquired with separate funds as the separate property of the other spouse, he/she is not estopped from later asserting that the property is community property, when such person concurred due to error, fraud, or duress. However, when a spouse acknowledges that real property was purchased with the other spouse’s separate funds, such spouse is estopped from denying the separate character of the property.
A particular property is characterized as community or separate on the basis of the inception of title to the property, which is inferred from the intention of spouses shown by the circumstances surrounding the inception of title. Inception of title occurs “when a party first has right of claim to the property by virtue of which title is finally vested[ix].”
[i] Franklin v. Franklin, 116 N.M. 11, 17 (N.M. Ct. App. 1993)
[ii] Cockerham v. Cockerham, 527 S.W.2d 162 (Tex. 1975)
[iii] Shumway v. Shumway, 106 Idaho 415, 679 P.2d 1133 (1984)
[iv] Houska v. Houska, 95 Idaho 568 (Idaho 1973)
[v] Cummings v. Cummings, 115 Idaho 186 (Idaho Ct. App. 1988)
[vi] Snider v. Snider, 613 S.W.2d 8 (Tex. Civ. App. Dallas 1981).
[vii] Succession of Davis, 496 So. 2d 549 (La.App. 1 Cir. 1986)
[viii] Gautreau v. Gautreau, 697 So. 2d 1339, 1352 (La.App. 3 Cir. June 18, 1997)
[ix] Scott v. Estate of Scott, 973 S.W.2d 694, 695 (Tex. App. El Paso 1998)