Community Property

In California, any property obtained prior to marriage and that which one spouse receives by gift or inheritance is generally separate property of the spouse.  All other property acquired during marriage is presumed to be community property.  This is regardless of the fact that one of the spouses may not be a wage earner.  Each spouse owns an undivided one-half interest in the community property.  One-half of a community property is attributable to each spouse, even though the property may have been purchased with the earnings of only one spouse.  In case of a real estate held in community property, the document evidencing title (grant deed or quitclaim deed) often clearly states “husband and wife, as community property.”       Either spouse may leave their one-half interest in the community property to persons other than their surviving spouse, if they so wish.  In the absence of a Will with contrary provisions, however, a community property passes to the surviving spouse.  To obtain full title to a property held as community property, the surviving spouse may use an expedited procedure called Spousal Property Petition, instead of probate.     Federal Tax Consequences – Unlimited Marital Deduction      No estate taxes may attach, if community property is transferred to the surviving spouse at the death of the first spouse.  The IRS rules allow for an unlimited amount of property to be transferred tax free to the surviving spouse who is a U.S. citizen.  This is referred to as the Unlimited Marital Deduction.       Non-U.S. Citizen:  If your spouse is not a U.S. citizen, you may still be able to leave your estate for the benefit of your spouse without estate tax consequences, by setting up a QDOT Trust (Qualified Domestic Trust) while both spouses are living.

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