California is a community property state. California Family Code § 760 (2018) provides: “[e]xcept as otherwise provided by statute, all property, real or personal, wherever situated, acquired by a married person during the marriage while domiciled in this state is community property.” This means all assets acquired or money earned by either party to a marriage, from the beginning of the marriage until the date of separation are equally owned, regardless of who earned it or purchased it. The same is true for debts. All debts incurred from the beginning of the marriage until the separation?? are community debts. Each party to a marriage is equally
liable for debts.
What is not community property is separate property. Separate property consists of assets acquired or owned prior to marriage, or gifts inherited or received during the marriage. Separate property can also include gifts from one spouse to the other. Like separate property, separate debts belong to only one spouse or domestic partner. Debts incurred before marriage are separate debts. For example, educational loans incurred before marriage would ordinarily be separate debts.
In certain cases, when separate property is “commingled” with community property, it can lose its separate status and become community property.
When a married couple establishes a living trust, it is important for them to decide the character of their property and define that in their estate plan. Why? Upon the death of the first spouse, the separate property of the deceased spouse and 100% of the community property is stepped-up
in value to the fair market value as of the date of death. Conversely, the surviving spouse’s separate property is not stepped up.
There are other things to consider when determining the character of separate and community property for estate planning. For example, income tax benefits might be realized through proper characterization of a married couple’s assets.
Have more questions about how to structure your estate plan? Contact CASHMAN LAW today for a free consultation to see how we might assist.
The contents of this blog are intended to convey general information only and not to provide legal advice or opinions. The posting and viewing of the information on this blog should not be construed as, and should not be relied upon for, legal or tax advice in any particular circumstance or fact situation. While effort is taken to update the information presented, it may
not reflect the most current legal developments. Please contact CASHMAN LAW FIRM LLC (Hawai’i)/ CASHMAN LAW LC (California) to consult with an attorney for advice on specific legal issues.