The Effect of Community Property Laws on Colorado Estate Planning
- harveyskis
- Aug 6
- 4 min read
Colorado is a popular place to move to. People who move to Colorado often have property they previously acquired in another state. Depending on where they previously lived, this could be a significant issue in estate planning in Colorado because some or all the previously acquired property might be deemed to be “community property.”
Community property is property acquired by either spouse during marriage while living in a state that has community property laws in effect. The states of Arizona, California, Idaho, Louisiana, Nevada, New Mexico, Texas, and Washington have community property laws and are commonly referred to as community property states. The other 42 states are referred to as separate property states. While community property laws are most often applied to residents of community property states, they may also be applicable to a resident of Colorado if that person dies owning real estate located in a community property state or personal property that was acquired while living in a community property state.
Community property laws originated in times when it was customary for the husband to be the sole source of family income and to own all or most of the family assets. The original purpose of community property laws was to protect the rights of the nonworking spouse in the family assets. The philosophy underlying these laws is that a spouse who tends the home and raises the children contributes as much to the family well-being as the spouse who provides the family income and therefore both spouses should have equal rights in the assets acquired during the marriage.
Community property laws treat marriage, for purposes of property acquisition, as a partnership in which the spouses are equal partners. Therefore, each spouse has an equal and present interest in all property acquired by either spouse during the marriage, except property that is deemed to be the separate property of a spouse. Separate property is property that was acquired by either spouse prior to the marriage, property that is acquired by either spouse during marriage by gift or inheritance, and property which by agreement between the spouses has been transmuted from community property to the separate property of a spouse.
In community property states the surviving spouse is entitled to half of the couple’s community property regardless of the provisions of the deceased spouse’s will or trust. If a spouse dies intestate in a community property state and leaves no children, the surviving spouse is usually entitled to all the couple’s community property.
A surviving spouse’s community property rights attach only to the spouses’ community property and do not attach to the deceased spouse’s separate property. Because the amount of community property is usually proportional to the length of the marriage, a spouse of many years more likely to receive a larger community share than a recently married spouse. Another difference between community property rights and elective share rights is that the amount of the community property share is the same whether or not there are surviving children of the deceased spouse, while an elective share is usually less if there are surviving children of the decedent.
Perhaps the most significant difference between the elective share and the community property share is that the community property share, unlike the elective share, is not dependent upon survival. Because each spouse owns a one-half interest in the community property, a spouse’s interest in community property may be devised or otherwise passed on to the spouse’s heirs regardless of whether the spouse survives or predeceases the other spouse. An elective share right, of course, may only be exercised by a surviving spouse. This difference is especially significant in the situation where most of the substantial assets acquired during the marriage are in the name of one spouse and the spouses, either because they are childless or because one or both of them have children by a prior marriage, have significantly different heirs. In a separate property state the heirs of the no-asset spouse would get little or nothing if that spouse failed to survive the asset spouse, while in a community property state the heirs of the no-asset spouse would be entitled to that spouse's share of the community property (i.e., half of the community assets) regardless of which spouse dies first.
Another significant difference between the elective share and the community property share is that in a separate property state a divorced ex-spouse has no right to an elective share, while in a community property state a surviving divorced ex-spouse may claim half of any community property in the estate of the deceased ex-spouse that had not been allocated between the parties in the divorce proceeding. Also, unlike the elective share in most separate property states, a surviving spouse may claim a community property share without renouncing the will of the deceased spouse. This means that in most cases a surviving spouse may claim his or her community property share and take any property devised to the surviving spouse in the deceased spouses will.
Estate planning with community property can be complicated. If you or your spouse came to Colorado from a community property state, and need to create an estate plan in Colorado, please contact my office. We would be happy to assist.
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