California Community Property Laws

California Community Property Laws

by Feb 22, 2017Family Law

California is a “community property” state, which means that most debts incurred by one spouse during the marriage are owed by both spouses. California community property laws apply to same-sex marriages as well, so it’s important to understand how the laws will be applied in the event of a divorce.
 

Incurred Debts

California community property laws dictate that most debts incurred by either spouse during the marriage are owed by the couple (aka “the community”), even if only one spouse signed the paperwork for the debt.

The key phrase to remember is “during the marriage”, as debts incurred (like student loans) prior to the marriage won’t automatically become joint debt.

However, after a legal separation or divorce, a debt is generally owed only by the spouse who incurred the debt, unless the debt was incurred for family necessities, to maintain jointly owned assets (for example, to fix a leaking roof), or if the spouses keep a joint account.
 

Income And Property

According to California community property laws, a couple’s income is shared as well. All income earned by either spouse during marriage (as well a property bought) is considered community property.

Gifts and inheritances received by one spouse, as well as separate property owned before marriage that’s kept separate, are the separate property of one spouse. All income or property acquired before or after a divorce or permanent separation is also separate.
 

Removing Liability

Couples that are concerned about California community property laws do have options. Couples can choose to sign an agreement that explicitly states that their debts and income will be treated separately.

Signing a pre- or postnuptial agreement like this can make sense for a couple before one spouse goes into business. (But if you’re already in business, signing an agreement now won’t protect your spouse from liability for business debts that you already owe, only from liability for future business debts.)

You can also sign an agreement with a particular store, lender, or supplier, stating that the creditor will look solely to your separate property for repayment of any debt, essentially removing your spouse’s liability for any obligation or debt from the contract — if you can get the other party to agree.

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