Community property and your estate.

Community property and separate property.

Generally, property either spouse earns or acquires during marriage while living in New Mexico is community property, owned equally by both spouses regardless of whose name is on it. Separate property includes what you owned before marriage and gifts or inheritances you received individually. Mixing funds can blur the line, so records matter.

What happens at death.

When one spouse dies, the survivor keeps their own half of the community property. The deceased spouse can leave their half, and their separate property, by will. Without a will, state intestacy rules apply, and the result depends on whether the deceased had children from another relationship and what kind of property is involved.

In a blended family, the default rules can leave the surviving spouse sharing property with stepchildren, or leave stepchildren with less than the deceased intended. A will or trust is the way to choose a different outcome.

Moving to or from New Mexico.

New Mexico has laws that address how to treat property acquired by couples who lived in other states, including property that was community property elsewhere. If you moved here from a common-law state, or are leaving New Mexico, do not assume your old documents still do what you want. Have them reviewed.

Tools that work with community property.

• Wills and trusts: to direct each spouse's half and protect children from a prior relationship
• Transfer on death deeds: see our guide on New Mexico TOD deeds
• Beneficiary designations: retirement accounts and life insurance follow the form on file, not the will
• Community property trusts or agreements: in some situations, spouses sign agreements about how property is held. Ask whether it fits yours

A tax benefit worth knowing.

Under federal tax law, both halves of community property generally receive a new tax basis at the first spouse's death. That can sharply reduce capital gains tax if the survivor later sells appreciated assets. It is one reason couples in community property states often keep property as community property.