California’s community property laws can be complex. If you don’t have a plan in place, the state will decide how your assets are divided and it may not align with your personal wishes.
When planning your estate in California, your assets may be affected by the state’s community property laws.
California is one of only nine states that follows community property rules, which means that how your property is classified can affect not only your estate plan but also how your assets are distributed after your death.
When planning for your future, you would benefit from working with a knowledgeable La Jolla estate planning lawyer to help you understand how these laws apply to your specific situation.
Working with an attorney can ensure that your plan protects both your property and your loved ones.
What Is Community Property?
In California, community property is any assets that are acquired by a married couple during the period of their marriage. This includes income earned by either spouse during marriage, property purchased with that income and debts incurred while married.
In contrast, separate property is assets owned by either spouse before marriage. This would include inheritances or gifts given specifically to one spouse or property acquired after separation.
Understanding how community and separate property are different will help you structure your estate plan.
How Community Property Affects Estate Planning
Community property is owned equally by both spouses, so each spouse has the right to dispose of their half of the community property in their will or trust. That also means that one spouse cannot have complete control of the community property assets.
For example, if a married couple owns a home as community property, each spouse controls 50% of it. When one of the spouses dies, the deceased spouse can only leave instructions regarding what happens to their half.
Unless there is estate planning, the living spouse might automatically inherit the deceased spouse’s share under California’s laws of intestacy.
This makes it essential to have a well-defined estate plan so that your wishes are carried out and conflicts are avoided.
Common Issues That Arise
- Blended Families – If you have children from a previous marriage, failing to plan properly could mean your current spouse inherits all community property, leaving your children without an inheritance.
- Business Ownership – If a business is considered community property, your spouse may automatically own half of it, even if you were the one primarily running it.
- Real Estate – Community property status can affect how homes and investment properties are passed down or taxed.
Why an Estate Plan Matters in a Community Property State
California’s community property laws can be complex. If you don’t have a plan in place, the state will decide how your assets are divided and it may not align with your personal wishes.
A carefully drafted estate plan can clarify ownership of community and separate property, protect assets for children from previous relationships, reduce the risk of family disputes or probate complications and ensure a tax-efficient transfer of assets.
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