What Are Community Property, Quasi-Community Property, and Separate Property in California Law?

If you live in California, then you need to know about community property, quasi-community property, and separate property.  That’s true especially if you’re married or in a registered domestic partnership.

All assets of a single or unmarried person are the property of her and her alone.  Nobody else has any present interest in those assets.  Also those assets are not subject to payment of debts of anyone else, absent an agreement, court order, etc.

In California the assets of each person in a marriage or registered domestic partnership are one or three types:

1. Community property;
2. Quasi-community property; or
3. Separate property.

All of this discussion about marital assets in California applies to spouses of a married couple.  It also applies to the domestic partners of a registered domestic partnership.  Trying to keep things simple, in this blog post I will use language regarding married couples and not registered domestic partnerships.  All of that language applies to both.

Community Property

Community property are all assets acquired by either spouse during marriage and while living in California.  (“Acquired” implies gained through personal efforts.)  Employment income of either or both spouses is a perfect example of community property.

Each spouse has complete control over community property assets, with some exceptions.  One exception is that transfer of real property ownership requires the signatures of both spouses.

The theory behind community property is that the spouses are a team working together.  Perhaps a wife foregoes employment income to raise children of the marriage and manage the household.  The husband works and generates all employment income of the marriage.  The theory is that the husband would not be able to focus on work in that way without the efforts of the wife at home.  Accordingly, the wife has as much of an ownership interest of the husband’s employment income as the husband has in it.

Most likely some of the husband’s community property income will not be spent and will become a community property asset.  That could be cash in a bank account, funds transferred into an investment account, funds spent to purchase a vehicle, etc.  Again, each of the husband and the wife have equal ownership of, and complete control over, each community property asset.  (Again, limited exceptions exist.)

The same is true regarding employment income and assets acquired in another community property state prior to moving to California.  There are nine community property states:

• Louisiana
• Texas
• New Mexico
• Arizona
• California
• Nevada
• Idaho
• Washington
• Wisconsin

Quasi-Community Property

Likewise, quasi-community property are all assets acquired by either spouse during marriage while not living in California that would have been community property had the spouse who acquired the assets been domiciled in California at the time.  Community property and quasi-community property are treated exactly the same according to California law.

Because of that, I will primarily discuss only community property and separate property for the remainder of this blog post.  Please note that the discussion of community property below applies equally to quasi-community property too.

Separate Property

Two types of assets received during marriage are not considered to be community property.  First, assets received by gift or inheritance are the separate property of the receiving spouse (and not community property of both spouses).  Second, the income or assets generated by separate property assets also are the separate property of the spouse who owns the separate property asset.  That’s true even if received during marriage while living in California.

Of course, the assets that each spouse had prior to the marriage are the separate property of that spouse.

In other words, as to a married couple living in California the separate property are:

1. All assets acquired by either spouse prior to marriage;

2. All assets received by either spouse during marriage by gift or inheritance;

3. The income or assets generated by separate property.

Everything else is either community property or quasi-community property.

Each spouse has sole control over her separate property.

Changing the Characterization of an Asset

The characterization of an asset as community property, quasi-community property, or separate property can change.

For example, the spouses could change the characterization of an assets from community property to separate property, or vice versa.  The act of making that change is called transmutation.

Mixed Characterization Assets

An asset could be partially community property and partially the separate property of one or each of the spouses.  That would occur when the assets contributed toward acquiring that mixed characterization asset were partially community property and partially separate property.

For example, a husband and wife purchase a house for cash.  They pay one-half from their community property, one-quarter from the husband’s separate property, and one-quarter from the wife’s separate property.

That also could occur in this situation:  A wife inherits a house from her parent with the obligation to continue paying off the related mortgage.  Then she and her husband spend community property employment income of the wife (or the husband) to make mortgage payments of the house.

Why Does this Characterization of Assets Matter?

Whether an asset is community property or separate property matters in various situations.  Primarily those situations are:

1. Dividing assets at divorce (or dissolution of marriage or registered domestic partnership);
2. Payment of the debts and obligations of the spouses; and
3. Distribution of assets at death.

The culmination of a divorce court proceeding is a judgment ending the marriage, dividing the assets, creating parental physical custody (if there are minor children), etc.  Each spouse keeps his or her separate property.  The spouses divide the community property equally between them.

Community property assets generally are liable for the debts and obligations of each spouse.  The separate property assets of each spouse are liable for the debts and obligations of the owning spouse, but not of the other spouse.

When one spouse dies without having specified the person to receive his assets at death, then California law specifies the person or people to receive those assets.  And it depends on whether an asset is community property or separate property.  We will discuss that in the next series of blog posts.

Get Help from an Experienced Trusts and Estates Attorney

Planning ahead for transfer of assets after your death can be very complicated.  There are many factors to consider, including who you want to receive the assets.  Also consider how easy you want to make things for your relatives after you die.  If you don’t do this correctly, then you may create confusion and even conflict among relatives after your death.

Hiring an attorney experienced with California transfers of assets after death is critical for obtaining the results that you need.  In addition, the advice and guidance of an attorney experienced with transfers of assets after death is invaluable in these cases.

At Meinzer Law Firm, P.C., we have over 20 years of experience helping clients with estate planning and transfers of assets after death in California.  Contact Meinzer Law Firm, P.C., in Torrance to assist you with your California estate planning or transfers of assets after death.