Community Property

Community Property Division in Jefferson Parish

Louisiana is a community-property state. In the absence of a valid matrimonial agreement establishing a different property regime, property acquired during the marriage through the effort, skill, or industry of either spouse is generally considered community property.

When a marriage ends, the spouses must identify, classify, value, and divide the property and debts belonging to the former community.

At Marino & Ehle, LLC, attorney Davidson S. Ehle III handles select community-property and divorce matters in Jefferson Parish. He can help identify community and separate assets, evaluate debts and reimbursement claims, negotiate a proposed division, and seek a judicial partition when the parties cannot reach an agreement.

What Is Community Property?

Community property generally includes property acquired during the existence of the community-property regime through the effort, skill, or industry of either spouse.

Depending on the circumstances, community property may include:

• Employment income earned during the marriage
• Bank and investment accounts funded with marital earnings
• Real estate purchased during the marriage
• Vehicles acquired with community funds
• Retirement contributions and benefits earned during the marriage
• Ownership interests in businesses established or acquired during the marriage
• Property donated to both spouses jointly
• Income generated by community property
• Income generated by separate property
• Other property not classified by law as separate property

The name appearing on a title, account, or deed does not always determine whether an asset is community or separate. The source of the funds, the date of acquisition, and the applicable law may be more important than how the property is titled.

What Is Separate Property?

Separate property belongs exclusively to one spouse.

Separate property may include:

• Property acquired before the community-property regime began
• Property inherited by one spouse individually
• Property donated to one spouse individually
• Property purchased entirely with properly traceable separate funds
• Certain damages or indemnity connected to a spouse’s separate property
• Property classified as separate under a valid matrimonial agreement
• Property received in a voluntary partition of community property during the marriage

For example, a vehicle purchased and paid for before marriage will generally remain the separate property of the spouse who acquired it.

Property inherited by one spouse during the marriage will also generally remain separate, provided it was left or donated to that spouse individually rather than to both spouses jointly.

Does Commingling Make Separate Property Community?

Not automatically.

Separate property does not necessarily lose its classification merely because it is deposited into an account containing community funds. However, the spouse claiming that an asset is separate may need to trace the funds and prove their separate origin.

Commingling can make classification more difficult when:

• Separate and community funds are deposited into the same account
• Records are incomplete or unavailable
• Money is transferred repeatedly between accounts
• Community earnings are used to purchase or improve separate property
• Separate funds are used to purchase community property
• A business account is used for both personal and marital expenses

When the source of funds cannot be established, disputes may arise over whether the asset is community or separate.

For that reason, spouses claiming separate property should preserve bank statements, closing documents, inheritance records, donation records, purchase agreements, tax returns, and other documents showing how and when the property was acquired.

Reimbursement Claims Between Spouses

Even when property remains classified as separate or community, one spouse may have a reimbursement claim based on how funds were used during the marriage.

Examples may include:

• Community funds used to pay a spouse’s separate debt
• Community funds used to improve or benefit a spouse’s separate property
• Separate funds used to pay a community obligation
• Separate funds used to acquire or improve community property
• One spouse’s separate funds used to benefit the other spouse’s separate property

A reimbursement claim does not necessarily change the classification or ownership of the property. Instead, it may create a monetary claim that must be considered when the community is partitioned.

The amount of reimbursement depends on the particular Civil Code article involved and may be limited to one-half of the amount or value used in some circumstances.

Community Debts and Separate Debts

The division of property also requires identifying and classifying debts.

Community obligations may include debts incurred during the marriage for the common interest of the spouses or for the interest of the other spouse.

Possible community debts include:

• Home mortgages
• Vehicle loans
• Credit-card balances
• Business obligations
• Tax liabilities
• Medical expenses
• Household expenses
• Loans used for community purposes

A separate obligation may include certain debts incurred before marriage or debts incurred solely for the benefit of a spouse’s separate property.

The classification of a debt can be as important as the classification of an asset. The spouses may disagree over who incurred the obligation, how the funds were used, and whether the debt benefited the community.

Businesses and Professional Practices

A business or professional practice can be one of the most complicated assets in a community-property partition.

Important questions may include:

• When the business was formed or acquired
• Whether community or separate funds were invested
• Whether the business increased in value during the marriage
• Whether either spouse contributed labor or management
• Whether personal expenses were paid through the business
• Whether income was retained or distributed
• Whether business goodwill has value
• Whether part of the goodwill is attributable solely to the personal qualities of one spouse
• Whether discounts should apply for lack of control or marketability

Business valuation may require accountants, appraisers, or other financial professionals.

Louisiana law allows a court to include business goodwill in the value of a community-owned business, but goodwill attributable solely to the personal qualities of the spouse receiving the business is excluded.

Retirement Benefits

Retirement benefits earned during the community-property regime may be partly community property even when the account or plan is held in only one spouse’s name.

Retirement assets may include:

• Pensions
• 401(k) accounts
• 403(b) accounts
• Deferred-compensation plans
• Individual retirement accounts
• Government retirement benefits
• Military retirement benefits
• Other employer-sponsored plans

The community portion may need to be divided through a qualified domestic relations order or another plan-specific order.

Retirement division should be handled carefully because tax treatment, survivor benefits, plan restrictions, and federal law may affect the form of the judgment.

How Community Property Is Partitioned

Former spouses may divide community property by agreement. If they cannot agree, either spouse may request a judicial partition.

Louisiana’s partition procedure generally requires each party to file a sworn detailed descriptive list identifying:

• All alleged community assets
• The proposed value of each asset
• The location of each asset
• All alleged community liabilities
• Reimbursement and other claims between the spouses

A party generally has 45 days after service of the appropriate motion to file the sworn detailed descriptive list, unless the court grants additional time for good cause. The parties then have an opportunity to agree with or challenge the classification and values asserted by the other spouse.

Equal Net Value Does Not Mean Every Asset Is Split in Half

Louisiana law generally requires the court to divide the community so that each spouse receives property of equal net value.

That does not mean every individual asset must be physically divided equally.

The court may:

• Award a house to one spouse
• Assign a vehicle to one spouse
• Allocate a business to the spouse operating it
• Divide bank and investment accounts
• Assign responsibility for particular debts
• Order one spouse to pay an equalizing sum
• Order the private sale of an asset
• Order a public sale when other methods are impractical

In making allocations, the court may consider the nature and source of the asset or debt, the economic circumstances of each spouse, and other relevant circumstances. The allocation of a debt between former spouses does not alter the rights of an outside creditor.

Valuing Community Property

In a judicial partition, community assets are generally valued as of the time of trial on the merits rather than necessarily at the date of separation or divorce.

Valuation disputes may involve:

• Real estate
• Closely held businesses
• Professional practices
• Vehicles
• Investments
• Retirement benefits
• Equipment
• Jewelry
• Collectibles
• Household furnishings
• Intellectual property
• Claims or causes of action

Appraisers, accountants, vocational professionals, or other experts may be necessary in complex cases.

Preserving Property After Separation

After the community-property regime ends but before the property is divided, the former spouses generally continue to co-own former community property.

Each spouse has duties concerning the preservation, management, and accounting of that property.

A spouse should obtain legal advice before:

• Selling or transferring property
• Removing substantial funds from an account
• Encumbering real estate
• Disposing of business assets
• Changing beneficiaries
• Destroying records
• Allowing insurance to lapse
• Making unusual expenditures
• Denying the other spouse access to information

Records should be preserved concerning all significant transactions occurring after separation.

Documents Useful in a Community-Property Case

A client preparing for a consultation should consider gathering:

• Prenuptial or matrimonial agreements
• Tax returns
• Bank statements
• Investment statements
• Retirement-account statements
• Real-estate closing documents
• Mortgage and loan records
• Vehicle titles and loan statements
• Business records
• Credit-card statements
• Life-insurance information
• Inheritance and succession records
• Donation documents
• Appraisals
• Records of major improvements
• Evidence showing the source of purchase funds
• Documents supporting reimbursement claims

Complete records can make it easier to classify property, establish value, trace separate funds, and identify community obligations.

What Davidson S. Ehle III Can Do for You

Davidson S. Ehle III can assist clients with the financial and procedural issues involved in dividing community property.

His representation may include:

• Identifying community and separate property
• Reviewing matrimonial agreements
• Tracing separate funds
• Preparing or reviewing sworn detailed descriptive lists
• Identifying reimbursement claims
• Evaluating community and separate debts
• Obtaining appraisals and business valuations
• Reviewing retirement and deferred-compensation benefits
• Negotiating a proposed property settlement
• Preparing partition agreements and judgments
• Litigating classification, valuation, allocation, and reimbursement disputes
• Coordinating with accountants, appraisers, and other financial professionals

The objective is to identify the entire marital estate, classify each asset and liability correctly, and pursue a division that provides the client with the net share required by Louisiana law.

Contact a Jefferson Parish Community Property Lawyer

Community-property disputes can become more difficult when records are missing, businesses are involved, or separate and community funds have been mixed.

Obtaining legal advice early can help preserve financial records, prevent unauthorized transfers, identify reimbursement claims, and prepare for an informed division of property and debts.

Contact Marino & Ehle, LLC to schedule a paid consultation with Davidson S. Ehle III regarding community-property classification, valuation, negotiation, or judicial partition in Jefferson Parish.