Marital interest laws vary by state and can have a significant impact on estate planning for married couples. These laws determine how assets are owned and distributed between spouses. It is important to consider the specific laws of your state when creating an estate plan to ensure that your wishes for distribution of assets are carried out correctly. Failure to consider these laws can lead to unintended consequences and negatively affect the implementation of your estate plan. For example, in common law states, assets acquired during the marriage are typically considered separate property, while in community property states, assets acquired during the marriage are considered jointly owned by both spouses. Understanding these differences is crucial for creating an effective estate plan.
What is the difference between a community property state and a common law state?
In common law states, property acquired by either spouse during the marriage is typically considered separate property and is not subject to division upon divorce or death. Each spouse maintains separate ownership of the property they acquire during the marriage. This means that any assets acquired during the marriage are considered separate property. Neither spouse has any kind of ownership interest in the other spouse’s property, including income earned during the marriage. This is important to consider when creating an estate plan because it affects the rights of ownership, rights to income from property, rights and duties of management and control, rights to make lifetime gifts in the event of divorce, and rights to dispose of property at death. For example, if a property is considered separate property, one spouse may not have the right to make decisions about how the property is managed or disposed of. However, the laws and rules can vary depending on the jurisdiction, so it’s important to consult with a legal professional to understand the specific laws in your state.
In a community property state like Texas, property acquired by either spouse while married is presumed to be jointly ownedâ€”this includes salaries, bonuses, dividends and any other income earned during the marriage. However, property acquired by a spouse prior to the marriage or through inheritance, gift, or descent, is considered separate property and is not subject to division upon divorce or death. These presumptions can only be overcome by legal documents, such as a prenuptial agreement, which can change the character of the property and alter the way it is divided. It’s important to note that these legal documents should be executed before the marriage, and must comply with state law. It’s important to consult with an attorney to understand the specific laws and requirements in your state.
Moving from a community property to a common law state, or vice versa
It is important to have your estate plan reviewed by a qualified attorney when you move to a new state, whether it is a common law or community property state. This is because the laws and regulations regarding property and debt can vary between states and it’s important to ensure that your estate plan is compliant with the laws of your new state. Additionally, the character of property does not change automatically when you move from one state to another. For example, if you move from a common law state to a community property state, your property does not automatically become community property. A qualified attorney can help you understand how the laws of your new state affect your estate plan and can help you make any necessary adjustments to ensure that your assets and debts are properly classified and managed.
Only a qualified estate planning attorney can help you draft a plan that meets the unique needs of you and your spouse, while also adhering to your states marital interest laws.
Whether you live in Texas, or are moving to Texas from another state, the Hailey-Petty Law Firm is here to help you understand the laws that could impact your estate plan, as well as your options. If you have questions about estate planning in Texas, we encourage you to schedule a free 30-minute consultation with one of our attorneys. Use the brief form below to get in touch with us today!
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