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Community property law and estate planning

Estate planning is a complicated business, but in community property states, it is even more so. Under community property laws, spouses both enjoy one-half ownership of all their marital property, which can greatly complicate matters when it comes time to create an estate plan. If you are married and are beginning to think about how you’d like to pass on your estate, it is very important to consider how this state-specific issue may affect your planning.

Unless you had the foresight to separate certain pieces of property with a prenuptial agreement, most of what you own as a married person is also owned by your spouse. This can create substantial conflicts when it comes to designating who should receive your property when you pass away if you remain married to your spouse until that point.

If, for example, you own a small business and want to leave it to your sibling, this may be problematic. Under California law, your spouse owns half of your interest in the business. He or she may create complications when it comes time to pass the business along. When you pass away, you only retain the right to distribute your separate property and your share of your community property. In the above example, if your business is community property between you and your spouse, you may only give your sibling your half of the ownership without further preparation.

None of us knows how much longer we have to live, so if you have any concerns about the state of your affairs, now is the time to address them. Make your estate planning a priority, for your and your spouse’s sake and for that of the legacy you hope to leave your heirs.

Source: FindLaw, “Inheritance Law and Your Rights,” accessed June 15, 2018

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