NASE Blogs

Community Property

Mar 23, 2011

Q: Can you tell me how community property is handled for purposes of inheritance?

A: For purposes of inheritance each spouse in a community property state owns his or her half of the community property and can dispose of that half by will or living trust. It does not automatically pass to the surviving spouse. A surviving spouse continues to own his or her separate half.

Community property states are Alaska (both spouses must sign an agreement using specific language), Arizona, California, Idaho, Louisiana, Nevada, New Mexico, Texas, Washington and Wisconsin.

In these states (excluding Alaska), assets acquired by either spouse during the course of a marriage are considered community property. But assets acquired by one spouse as an individual, or outside the marriage (such as gifts and inheritances), are not considered community property.  In Alaska a couple may voluntarily decide to enter into a written "community property agreement" or "community property trust." A couple which does not choose to sign such an agreement does not have community property according to Alaska law.

As a rule non-community property becomes community property if the two are mixed. For example, non-community property money placed in a community-property bank account becomes community property. Here also, Alaska's law differs somewhat depending on the wording of the community property agreement.

Recently five states have provided a new way for married couples in community property states to own property. It’s called Community Property with Right of Survivorship (W.R.O.S.). Property titled in this way passes to the surviving spouse directly and without probate. The five community property W.R.O.S. states are Arizona, California, Nevada, Texas and Wisconsin. Note: Changing property title to Community Property with Right of Survivorship may alter the rights of judgment creditors with respect to a spouse's assets.