Estate Planning Basics Part 6: Community Property and Separate Property in Estate Planning
In the estate planning context, the concepts of community property and separate property are very important for California married couples* to understand. Generally, all of the income and property acquired during a marriage is considered community property. Each spouse owns a joint 50% interest in each item of community property. Separate property is (a) property a spouse acquired before the marriage, (b) property acquired by gift or inheritance, whether before or during the marriage, and (c) any proceeds or income generated by (a) and (b). A spouse has no right to the other spouse’s separate property.
A spouse can freely give away their separate property to whomever they want in a will or a trust. They can also give away their 50% interest in the couple’s community property. When a spouse wants to give away his or her share of the community property to someone other than his or her spouse, there are a lot of pitfalls that can arise. If this gift is not drafted properly, the surviving spouse can void the gift of the community property and defeat the deceased spouse’s wishes.
There are many valid reasons why a couple may wish to give their share of the community property to someone other than the surviving spouse. This is common in second marriages, marriages where the spouses have separated, or where one spouse simply has different beneficiaries in mind. If spouses wish to dispose of their share of the community property to someone other than the surviving spouse, the couple should meet with an estate planning attorney to make sure that the will or trust is drafted correctly.
If you have any questions about community property and separate property in estate planning, please contact me for a free consultation.
*The rules on community property and separate property also apply to registered domestic partners, though there are some exceptions.