What are community and common property states?

What Are Community and Common Property States?

Different states view assets and debts acquired during marriage and who exactly owns that property differently. There are two different types of state, community property, and common law property.

What is a Community Property State?

In a community property state, all money earned, assets acquired, and debts incurred during the course of a marriage are equally owned by both husband and wife. At death, all assets go to the surviving spouse unless there is a valid will directing otherwise.

A spouse or member of a couple can own separate assets and dispose of those assets as they wish. Gifts and inheritances are not considered community property.

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Community Property States

Community property states include Arizona, California, Idaho, Louisiana, Nevada, New Mexico, Texas, Washington, and Wisconsin. Alaska is on “opt-in” community property state where both parties can, in writing, make their property community or keep it separate.

What is a Common Property State?

In a common property or equitable distribution state, property acquired by one spouse belongs 100% to that spouse unless the asset is in both names. All other states are common property.

What is the Advantage to Living in a Community Property State?

The biggest advantage to living in a community property state is in estate taxes and tax planning. In a community state, the surviving spouse receives, tax-free, 50% of the decreases spouse’s separate assets and 100% of commonly held property.

What is Marital Property?

Marital property is any property acquired by either spouse during the marriage. Non-marital property is property acquired before marriage, as a gift or inheritance after marriage.

What is a Spousal State?

Spousal states affect mainly people taking out loans or mortgages. Spouses must sign a document acknowledging the loan, but not taking responsibility for it.

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Disclaimer

This is a complex area and this information just the tip of the issues. If you have questions about community and common property, moving states, or debt, contact an attorney.

References
https://www.legalzoom.com/articles/do-you-live-in-a-community-property-state
https://www.meridianhm.com/resource/blog/spousal-states-community-property-states/
https://www.investopedia.com/exam-guide/cfp/property-titling-transfer/cfp2.asp
https://tomorrow.me/trust-worthy/planning-ahead/7-things-you-should-know-if-you-live-in-a-community-property-state/
https://www.myfloridalaw.com/asset-debts/marital-property-vs-non-marital-property-florida/

Financially Stable Couples How to Manage Marriage and Finances

Financially Stable Couples: How to Manage Marriage and Finances

Few things are as painful or frightening to a child as parents fighting.

And few things are more destructive to marriages as financial troubles. According to Ramsey Solutions, the only thing that causes divorce more than money is infidelity.

So, how do you resolve the issue between marriage and finance? The obvious answer is to establish financial goals and live frugally. But, sometimes, the obvious answer isn’t the cure-all.

No doubt financial wellness will ease the strain on marriages, but financial wellness doesn’t guarantee happy marriages. And sometimes, the strain on your marriage goes deeper than money itself.

Luckily, there are some great ways to heal relationships damaged by financial strain, as well as ways to avoid financial strain altogether.

Take a look at these tips for handling marriage and finance woes:

How Does Money Affect Relationships

According to Dr. Kathleen Hall from Sharecare, “the first wound in a relationship usually involves finances.” This cause of marital wounds becomes more understandable when you realize that almost two-thirds of all newlyweds start off in debt.

On the other hand, money troubles don’t guarantee a divorce. In fact, couples who have great relationships also discuss money with their spouse. Another finding from the Ramsey Solutions study points out that “Ninety-four percent of respondents who say that have a “great” marriage discuss their money dreams with their spouse.”

Talking about money with your spouse doesn’t always have to be a fight. Dr. Hall adds that “money can be a source of destruction or a source of creativity in a marriage.”

So before you write off your marriage when financial hardship hits, make a promise to yourself and to your spouse that you will use your financial struggles as stepping stone to a stronger relationship.

How to Deal with Financial Stress as a Family

The first rule of surviving financial stress as a family is to know the value of family compared to the value of money.

If you think of finances and family in terms of investment, people generally invest much more time and willpower into money than they do family.

Think about it, at least 8 hours of every day are spent working and 8 hours are spent sleeping. Be honest with yourself, do you invest nearly as much time in your family as you do your money?

Of course, measuring your investment in money and family isn’t really fair — most people are trying to make money in order to support their family. But, we need the perspective that comes from believing we owe something more than money to our families.

This mindset teaches us one important thing that we should always remember: creating a strong family requires an active, daily investment of time and attention.

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Here are some great ideas for dealing with financial stress in marriage:

  • Family Night

    Set apart time to spend with your family. Make it a weekly habit. Family nights help families grow stronger and happier. Family nights are a great time to play games together. In general, playing games as a family is highly beneficial for both children and adults.

    For example, U.S. News revealed that playing helps people learn to be friends, learn difficult subjects, learn to cooperate and play fair, and improves all areas of life. Family night is also a great time to learn how to cope with difficult circumstances, such as financial troubles.

  • Family Dinner

    Eating together has shown to drastically improve the mental and physical health of children.

    Most notably, a report from The Atlantic showed that “children who do eat dinner with their parents five or more days a week have less trouble with drugs and alcohol, eat healthier, show better academic performance, and report being closer with their parents.”

  • Set Family Financial Goals

    Your kids should learn the basic principles of handling their finances while they’re young. You never know, you may pick up a few financial tips yourself while training your kids to be financially independent.

    If your kids ever get the urge to put up a lemonade stand, teach them to save and budget the money they make. Did you know that your kids could actually owe taxes from small entrepreneurial efforts? While this may be annoying, it does provide a great opportunity to learn and grow as a family.

  • Get a Jumpstart on Taxes

    The peak of financial stress for many couples is tax season. To prevent any marital duress due to financial stress, make sure you prepare your taxes well before the tax deadline.

    If you’re putting off your taxes for one reason or another (especially if you owe back taxes), it’s even more important that you get your taxes in order. The added weight of an IRS audit is enough to push any family to the breaking point.

  • Backyard Campouts

    Camping with children is stressful and tedious — like every other activity done with children. Fortunately, backyard camping is all the rage and has actually proven to be a great bonding experience for many families.

    Backyard camping eliminates the hassle of long trips into the mountains and keeps you within arms reach of the comforts of home; it also allows you to sit around a campfire as a family, tell stories, play games, and grow closer than you would by staying indoors.

How to Manage Finances in a Marriage

Most individuals have some sort of personal financial plan before getting married (no matter how poor the plan actually is). Once two people get married, these personal financial plans hardly ever work anymore. There are added expenses, additional debt, and new streams of income.

It’s important that you revise your financial plan once you get married. Luckily, there are many things you can do to handle your joint finances in marriage.

The first step for most couples will be to find a great budgeting app. The best budgeting apps will allow you to track your income, prioritize your spending, and create a budget that fits your unique financial situation.

Another option that many couples find helpful is the combination of debt and finances. If you do decide to combine, take advantage of zero percent interest on balance transfers from select credit card companies.

You may also consider using a debt resolution company to get your combined finances in order.

Other successful couples choose to separate their finances, though this is a much riskier path, in terms of marital success. Combining finances can mean greater financial risk, especially if they file joint tax returns (many people have been held responsible for mistakes/inaccuracies on their spouse’s tax return).

Remember that good marriages lie upon a foundation of teamwork and trust — this is still possible while keeping finances separate, but it is tricky.

Make sure you offer your help and support to your spouse when they are experiencing financial difficulties. You may even consider paying a bit more than your share on the monthly bills every once in a while. It may also be smart to put off a joint bank account until after your individual debts are paid off.

No matter your preferred method a managing finances, make sure you follow the three rules of marital financial success: communication, trust, and self-sacrifice.

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Disclaimers

We are not lawyers and are not giving legal advice. We strongly recommend speaking to a professional attorney.

Top 5 causes of debt

Top 5 Causes of Debt & How To Fix Them

They say it’s smart to have between 3-6 months worth of expenses saved up in case of an emergency. To give you an idea, if your monthly expenses round up to $5,000, there should be $30,000 sitting your saving account right now. But in this age of consumerism, people are likely swimming in debt instead of in a comfortable amount of hundred dollar bills. As of May 2016, 38.1% of all households carry some sort of credit card debt and according to the most recent survey from the U.S. Federal Reserve, the average credit card debt of U.S. households is about $5,700. That’s a lot of money to be sitting on credit cards that likely comes with an interest rate that will boost that debt even higher.

Sometimes, debt is accumulated from massive charges that are typically unexpected such as a medical emergency, a broken car or a divorce, but usually, accrued debt is over a longer period of time by charging common expenses like gas and groceries. These “small” charges here and there look unthreatening at first, but then it spirals out of control where you end up only paying the minimum balance each month, leaving you with more interest to pay in the future.

Here are the top 5 causes of debt and some suggestions for how you can get address the problem.

1. Divorce

The leading cause of arguments among couples revolves around money more than any other causes of typical domestic disputes. It’s likely that one or both parties had accrued debt prior to getting married and “what’s yours is mine” unfortunately applies to the bills too. Although it’s recommended to discuss money and spending habits before tying the knot, if couples don’t create a reasonable plan to paying off debt and spending money, it will lead to marital strife that can turn into divorce. The average percent of divorce in the United States is between 40-50% and the cost of getting divorced is $15,000-$20,000. Also going from a two-income household back to one can take a significant toll on your bank account.

2. Unemployment & Underemployment

No one expects to lose their job and it never comes at a good time. Unless you have the recommended 6 months worth of expenses stored in your savings account, you’re going to have a lot of accrued debt sooner than later just to pay off your current bills and it’s possible that it’ll take longer than 6 months to get another job. There’s also the unfortunate occurrence of taking a pay cut when having to suddenly work part-time either due to having a child, a medical issue, or getting fewer shifts at work. We’re creatures of habit, so although our employment status might have changed, it’s very likely that our spending habits haven’t. People are typically spending more than they earn and recent studies have shown that although income is decreasing, the rate of spending is still climbing up, which leads to the next reason for debt.

3. Poor Money Management

Related to financial illiteracy, not many people have a good grasp of managing the money they earn likely because they were never taught the simple rules of spending and saving growing up. These people rely on credit cards for expenses and the idea of instant gratification is a major factor. It’s so appealing for us to buy something and have it now, but pay for it later. If you don’t pay off your credit card balance in full, you’ll end up paying a good chunk of it in interests. Most credit cards today have an interest rate ranging between 15-20%, making anything you buy cost a whole lot more than what you paid for. This also ties in with impulse spending and making poor financial decisions. Having a monthly game plan to tackle your common expenses will keep you from spending more than you make. It’ll also be a good idea to educate yourself on the rules of the bank, loans and credit cards to see if you can reduce your fees, avoid late charges and have 0% APR for a set period of time.

4. Minimum Payment Trap

So you racked up a credit card and can’t pay the full balance. You know you have to pay something on it so you set up your account to automatically pay the minimum every month and brush it off, feeling assured that payments are being made. Months later, you check your account and wonder why you still owe so much. Well, that’s interest for you! Here’s an example to give you an idea: If you owe $10,000 on a credit card and pay a minimum of $250 per month and your interest is 15%, you’re going to be paying $3,950 in interest in the 56 months it’ll take you to pay it off. That $10,000 easily turns into nearly $14,000 before you know it. If your interest rate is 20%, that payment towards interest becomes $6,617 and it’ll take you 67 months to pay it all off! That’s over 5 years of your life spent paying off this credit card while you’re stuck paying off your typical expenses too, such as food, gas, rent or mortgage and a car. Bottom line is that you should always pay the balance in full, but if you can’t, pay as much as you can as fast as you can.

5. Military Status

A recent study revealed that members of the military accrue debt at a higher rate than civilians and there are a number of reasons why. First of all, military members may be receiving a steady paycheck but it isn’t large enough to support their means, especially if they’re supporting a family, making them resort to credit cards to compensate. Next, frequently moving can add to the debt if an active military personnel is forced to sell their home and they can’t get an immediate buyer. They end up paying two mortgages until they receive an offer on their old home. It may also be difficult for the spouse to find a good-paying job right away during relocation. And finally, when military members find themselves in debt, they end up staying in debt because they don’t want their superiors finding out. They don’t seek out help due to their fear of losing their security clearance, ruining their chances of a career advancement or being discharged. This just makes their debt continually increase.

If you’re currently in one of these situations, there are a number of routes to take to reduce your debt, but the first step should be to come up with a spending plan and stick to it. Review your spending habits and see where you can cut down. Your daily cup of Joe at the local coffee shop can definitely add up in the bills. Pay your balances in full as often as you can and use cash if you’ve got it. People tend to spend less when they only use real money to pay. And most importantly, if you’re married, make sure you keep all lines of communication open and ask for help if you need it. In a perfect world, both parties of the couple will be savers but that’s an unlikely story. If you’re the spender, it might be a good idea to have your spouse manage the money until you’ve got a good grasp on saving more money each month.

If you feel like you’ve tried it all on your own and need professional help, one of our professional and friendly counselors here at Pacific Debt can talk you through your options. Our consultations are free and it’s our goal to get you out of debt for less than you currently owe.

Options for debt in a marriage

Debt in a Marriage: What Are My Options?

Marriage is supposed to be a beautiful thing, but sadly, so many newlyweds don’t know each other’s finances before tying the knot. If one spouse is entering the new courtship with a newfound debt from their partner, there are probably a lot of questions that need to be answered.

To help you understand debt that comes from a partner after marriage, here’s what you need to know:

Is it Mine, Yours or Ours?

Every state has their rules when it comes to who owns what debt. One of the first questions that newlyweds have when it comes to debt is: Who the heck is responsible for this debt?

The first thing that you need to look into is if your state is a community property state. In a community property state, such as Arizona, Idaho and more, the spouse may be liable for the debt upon marriage. However, in anon-community state, the spouse won’t be liable for any debt they didn’t sign up for. A quick search for your state laws can let you know where your state falls.

Combining Debts

Regardless of what your local state laws are, many couples often want to combine their debt to pay it down fast. If this is the route that you want to take, there are many options that you can take advantage of.

For instance, many credit card companies offer balance transfers for zero percent interest for a limited time period. This is a great way to combine your debts all under one account. If you’re going to take this route, just make sure that your balances aren’t too high, because if you don’t pay your bills off in time, you may be stuck with an interest rate that is higher than 20 percent.

If you don’t want to take the credit card route, consider talking with a reputable debt resolution company. A good debt resolution company will be accredited with the American Fair Credit Council (AFCC), have at least an A BBB rating and never charge you upfront fees. Generally, they will be able to save you around 50% on your original account balances, if not more. To learn more about how Pacific Debt can help, check out the details on our debt settlement program.

Lastly, if most of the debt is coming from student loans, look into various federal programs to help consolidate the loan. This is a route that should be taken if the student loans are in the tens of thousands.

Separating Finances

If you believe your spouse should pay for the debt they created, that’s fine. However, keep in mind that a successful relationship works on teamwork.

When going this route, it’s best to wait on a joint bank account or combining any other accounts until the debt is entirely paid off. Aside from the debt, also make sure that you put in your fair share to the bills that have to be paid every month, such as the utilities, rent, cable and so forth. Try to find that happy medium that works for your relationship

In the long run, debt is going to take time to pay off. As long as you work as a team, create a budget and motivate yourself to pay off these debts, there’s no reason the debt will ruin the newfound marriage.

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