New Mexico is a community property state. Not every state is a community property state. In fact, only eight states observe community property laws: Arizona, California, Idaho, Nevada, New Mexico, Texas, Louisiana, Wisconsin and Washington. Community property touches everything from personal property ownership to debt to divorce and inheritance. That’s why understanding the ins and outs of community property law is essential. You can arm yourself with the information that will help you understand property distribution in your state. Community property is all property acquired during marriage. This typically includes all money earned, debts incurred and property acquired during the marriage. Under community property, spouses own – and owe – everything equally, regardless of who earns or spends the income. This is also regardless of who has their name on the property, generally.
Conversely, separate property in a community property state includes:
1. All property owned by a spouse prior to marriage.
2. Property obtained by a spouse after a legal separation.
3. Any property received as a gift or inheritance during the marriage from a third party (as long as this property remains separate from community property, such as joint banking accounts).
Also, pre-marriage debts remain separate property. For example, educational loans acquired before a marriage wouldn’t become community property.
But separate property can transform into community property. For example, if a spouse who owns property before the marriage adds the new spouse’s name to the deed, that home may become community property.
Community property laws rule in divorce court, splitting assets 50/50. Aside from assets and debts, business interests and pensions, like 401k plans, also fall under community property. That means a soon-to-be former spouse is probably entitled to a share of your retirement. In most divorces, community property is sold unless both parties can agree on property distribution. Such agreements typically only occur in uncontested divorces where couples decide on the divorce terms. These include everything from debt and asset division to child and spousal support. Uncontested divorces require a level of communication many divorcing couples can’t achieve. However, they do allow for a level of customization not recognized by community property laws.