So Jennifer Garner and Ben Affleck are splitting up. It’s a sad story (hey, I like Ben and Jen both), but there’s an interesting lesson for all of us in this news: That they agreed to divide their assets amicably (or so we are told) and mediate their divorce. This type of adult behavior is indeed rare in a split.
More importantly, they resided in California – it’s one of a handful of community property states, which has an effect on your finances as a couple (or to-be-former couple).
Community property statutes date back to when the U.S. annexed the southwestern states when it was Mexico’s territory. The states adopted the communal rules of family, a traditional approach to property rights that was based more or less on a homemaker and a working spouse (here’s a current list of community property states).
Community property is simple: Most assets accumulated during marriage are split equally between the spouses, no matter how they were earned. I am not a lawyer so I don’t give legal advice, but I am educated in this area and have been involved with divorces informing clients of what the general community property laws mean for them. Every state that has this law is different, so check with your state for specifics. Keeping that in mind, here are five must-know things about community property.
1. Retirement accounts
Even though they are accumulated separately, they are considered community property and divided equally between spouses. Social Security is an entitlement account and is handled differently.
2. Inherited money Is (usually) separate property
Inherited money is usually considered separate property, but there is a catch. If the money is used to purchase other assets after the inheritance or new assets are generated, then it can be considered community property.
3. Businesses you own
This is considered community property. This one can get ugly since the value is split with the spouse. It may be tough to raise the cash to pay the spouse. Imagine also having other shareholders involved or partners! It can get complicated. Talk to an experienced attorney about getting a spousal exclusion to those assets (like a postnuptial agreement). This is a very overlooked area in planning.
4. Prenuptial agreements
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SOURCE: Credit.com – Craig Cowles