In dealing with estate planning, real estate transfers, and other issues, questions about separate and community property often come up. Often times there is a desire to give a gift directly to a relative, but not to a spouse – present or future. Below is an explanation of the differences between these types of property ownership under California law and its impact on inheritance or gifts.
What is Community Property? What is Separate Property?
Under California Law, community property consists of marital assets obtained during the marriage from the labor of the spouses. Community property is owned jointly and shared equally by both spouses, oftentimes with both names on a deed or account.
Separate property consists of personal items, gifts, money, and property owned by either spouse prior to marriage, as well as gifts or inheritance received by one spouse during the marriage. Separate property can be converted to community property, however, if it is commingled, used for the support of a spouse, or by agreement or gift.
When separate property is mixed with marital assets, it is said to be commingled. Commingling separate property converts it into community property. For example, if a spouse receives an inheritance and deposits the inheritance funds in a joint checking account, it may be converted into community property. Moreover, if a spouse uses inheritance proceeds to purchase a home in which both spouses live and the title is put in both names, it will likely be converted into community property.
How to Choose if Property is Community or Separate?
To ensure that an inheritance or gift is separate property, it should be kept separate from joint marital assets; it should not be put into a joint checking account or used for a community property purchase. Other ways of converting property from separate to community property are: Prenuptial Agreement, purchasing assets with both names, Property Agreement, and/or amending an Estate Plan.
Conclusion
This is only a brief description of some of the steps that people can engage in to protect their assets and ensure that they are able to carry out their wishes. This article is not intended to be legal advice and does not create any sort of attorney-client relationship. Any group or individual is encouraged to contact a licensed attorney for more information or advice regarding the content of this article.
Todd Gallinger is an attorney specializing in Legal Planning. He has offices based in Long Beach and can be reached at (888) 255-9147. Read More Articles HERE