Community property is one form of joint ownership of assets. Unlike other forms of joint ownership, like holding property as “Joint Tenants With Rights of Survivorship”, community property applies only to married couples. Not all states recognize community property, but Texas is one of the states that does.
Community Property and Separate Property
So, if you’re married and live in Texas, the property you own can generally be divided into community property or separate property. Assets that are held as community property are owned in equal shares by both the husband and the wife, no matter whose name the asset happens to be titled in. Assets that are held as separate property are owned by each spouse in the proportion that he or she contributed separate earnings or property to purchase the asset.
Examples of community property include income earned by either spouse during the marriage and assets purchased with that income; dividends, interest or capital gains earned on community property; and dividends or interest earned on a spouse’s separate property during the marriage.
Examples of separate property includes each spouse’s earnings before the marriage; assets purchased with that income; capital gains on separate property; gifts, including inheritances that either spouse receives during the marriage; and gifts, including inheritances, that either spouse received prior to the marriage.
Community Property and Your Estate Plan
Without an estate plan, state laws –called intestacy statutes – dictate what happens to your property when you pass away. And, under state law, there are different rules for community property and separate property.
To make sure that your property goes to the loved ones of your choosing, it’s important to meet with an estate planning attorney to understand how your property is held and to make an effective estate plan.
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