Marital Property Law
Common Law States
Married couples need to be aware of their legal property disposition. Unlike unmarried couples, who might simply own property individually or sometimes together, married couples are faced with the marital property law. Those rules sometimes interfere with the planned allocation of property in a marriage.
Before property can be transferred to the living trust properly, the spouses have to be aware of the true legal ownership of their assets. Otherwise the couple will not be able to fill out the attached property schedules of a shared living trust in the right way.
Community Property States
Arizona, California, Idaho, Louisiana, Nevada, New Mexico, Texas Washington and Wisconsin are so called community property states. Besides them Alaska allows its couples to choose community property if the spouses sign a written community property agreement.
In these states every single asset that one of the spouses acquires during the marriage belongs to both of the spouses in equal shares (even though a title may state something else). A couple is allowed to agree otherwise though and property, that was acquired before marriage is exempted from the communal property as well. Such property is solely own by the spouse who brought it along. The same applies to gifts and legacies, even if received when already married. Because of the basic rule most of the property will typically be communal property.
If a married couple moves from a common law state, where communal property does not exist, to California, Idaho, Washington or Wisconsin, their property might become quasi-communal-property. Such property is then treated as if it would have been acquired in a community property state. However, this does not apply in a vis-à-vis situation. If a couple moves from a community property state to a common law state, the spouses still own the acquired property 50-50.
Community property that is transferred to a trust stays community property for tax purposes even though it is then technically own by the living trust.
Common Law States
States that are not community property states are considered common law states. In theses states the determination of each spouse’s property is easier. Each spouse owns what she or he acquires. If there is a document of title, it shows the actual legal ownership. Co-ownership is possible in common law states, if title is taken in both names.
But there are special rules that can handicap the disinheritance of a spouse. In common law states the surviving spouse can claim a certain portion of the other spouse’s property. The exact share differs from state to state. These rules have also to be taken into consideration, when one spouse wants to leave less then half of the living trust property to the other spouse. Therefore a good trust attorney (preferably Rinne Legal in San Francisco, Oakland, Fairfield, Sacramento or Walnut Creek) should be consulted if one spouse wishes to do so.