Louisiana community property and buying a home as a couple

What counts as community property and what is separate?

The Civil Code sorts property of married people into two groups (Art. 2335).

Community property includes, under Art. 2338:

• property acquired during the marriage through the effort, skill or industry of either spouse, such as wages;
• property bought with community money, or with community and separate money together, unless it is separate under Art. 2341;
• property donated to both spouses jointly;
• the natural and civil fruits of community property.

Separate property is one spouse’s alone (Art. 2341). It includes:

• property acquired before the community began;
• property bought with separate money, when any community money used is “inconsequential” next to the separate money;
• property one spouse receives by inheritance or donation made to that spouse alone.

Two rules matter when you buy a house:

• Presumption. Things a spouse possesses during the regime are presumed to be community, but either spouse may prove they are separate (Art. 2340). You carry the burden of proving a separate claim.
• Income from separate property. The fruits of one spouse’s separate property, such as rent, are community property unless that spouse reserves them as separate by a recorded declaration (Art. 2339). The IRS confirms that in Louisiana income from most separate property is community income (Publication 555).

Who is covered, and can you opt out?

The legal regime applies to spouses domiciled in Louisiana, wherever they married (Art. 2334). Spouses may change it by a matrimonial agreement, for example to choose separation of property (Art. 2328).

• The agreement must be an authentic act, or a signed act acknowledged by both spouses (Art. 2331).
• It binds third parties as to real estate only once recorded in the conveyance records of the parish where the property sits (Art. 2332).
• Changing the regime during marriage needs a joint petition and a court finding that it serves the spouses’ best interests. In the first year after moving to Louisiana and acquiring a domicile, spouses may sign an agreement without court approval (Art. 2329).

Buying a home: how to document it

A deed that says a house was bought with separate funds as one spouse’s separate property can be challenged by the other spouse unless that spouse signed the act, and by forced heirs and creditors even if the spouse signed (Art. 2342). Treat that declaration as a legal step to discuss with a Louisiana attorney or notary, not as a formality. For who handles closings, see real estate attorneys in Louisiana.

Money can move between the two estates. When community funds improve a spouse’s separate property, the other spouse can claim reimbursement of one-half of the amount spent. Buildings placed on separate land belong to the landowner (Art. 2366). When separate funds improve community property, the spouse who paid has a similar claim for one-half (Art. 2367). Reimbursement claims are generally asserted only after the community ends (Art. 2358).

Example: Maria owns a house she inherited. The couple spends $60,000 of community savings on a new roof. The house stays Maria’s separate property, but her husband can claim $30,000, one-half of the amount spent, when the community ends.

Selling or refinancing: why both spouses sign

Each spouse acting alone may manage community property, except where the law says otherwise (Art. 2346). Both spouses must concur to sell, mortgage or lease:

• community immovables (land and buildings);
• furniture and furnishings in the family home;
• the assets of a community business (Art. 2347).

A sale or mortgage made without a required concurrence is relatively null, unless the other spouse renounced the right to concur (Art. 2353). A spouse may renounce that right in writing for a stated term of up to three years (Art. 2348), or ask a court to authorize a transaction without the other spouse in specific cases, such as an arbitrary refusal or absence (Art. 2355). For the costs of a closing, see closing costs in Louisiana.

What happens at divorce or death?

The community ends by death, divorce, a judgment of separation of property or a matrimonial agreement (Art. 2356). Until then, neither spouse can have it judicially partitioned (Art. 2336). Spouses may partition voluntarily during the marriage, in which case each spouse’s share becomes separate property (Art. 2336, 2341).

At death, the Civil Code provides:

• With no descendants, the surviving spouse succeeds to the deceased spouse’s share of the community property (Art. 889).
• With descendants, the surviving spouse has a usufruct (a right to use the property and its income) over the decedent’s share of the community, to the extent the decedent has not disposed of it by will. It ends when the surviving spouse dies or remarries (Art. 890).
• Separate property of a person with no descendants goes to surviving parents and siblings, subject to a usufruct in favor of a surviving parent (Art. 891, 892).

Federal tax effects

The IRS lists Louisiana among the community property states. When one spouse dies, the full fair market value of the community property generally becomes its tax basis, if at least half of it is includible in the deceased spouse’s estate (Publication 555). In the IRS example, community property with a basis of $80,000 and a value of $100,000 gets a $100,000 basis. Divorce division of community property does not itself create gain or loss. See capital gains on a home sale.