Assets are considered separate or community based on when and how it was acquired. It is not possible to change the type of property simply by converting to cash and back. For the most part separate property will remain separate property for the duration of the marriage. For example, if an asset that was separate property is sold during the course of the marriage, the money or any other proceeds or profits from that sale are also considered separate property.

Separate Property

There are several types of property that can be considered separate property. These are:

· Inheritances or gifts received by either party during the time of the marriage. This includes joint gifts.

· Inheritances of gifts received by either party before the marriage occurred

· Capital gains received from separate party

· Income earned by either party before they married

Community Property

There are several types of property that are considered to be community property. These include:

· Interest or dividends either party earned on property that is defined as separate during the marriage

· Capital gains, interest, dividends that are gained on what is considered to community property

· Income earned by either party during the course of the marriage

It is possible to have an asset that is partly community property and partly separate property. For example, a couple receives a gift from one parent for a 20% down payment on a home. They then work with a mortgage broker to finance the remaining 80% of the home. The resulting asset would be 80% community, 10% separate property for the husband and 10% separate property for the wife (note: gifts are considered separate).

To further complicate matters, there are laws that supercede community property laws. A good example of this is insurance law. If a woman purchases a life policy utilizing community property, but names her father as her beneficiary, under insurance laws, the husband will not realize any of the proceeds of the policy upon his wife’s death. IRA’s purchased in a similar manner would have the same result.

As you can see, community and separate property definitions are not as simple as one might assume. It is important to work with a qualified attorney to ensure that a thorough understanding of your assets and how the law affects them is in place. Properly determining the type of assets held in your marriage will assist you in estate planning and can also be useful in the event of an unfortunate divorce. Contact an attorney to discuss your particular situation and needs.