Community income is generally a term used in community property regions to refer to income earned by one or both spouses during the marriage. In a community property area, both spouses jointly and equally own virtually anything acquired during the marriage. What this means is that it really doesn’t matter who earns the income or if even both spouses work; the couple has joint rights to the money made, rights to property acquired from it, and may continue to have some right to income beyond the length of the marriage.
There are several instances when the issue of community income may become of importance. One of these occurs in a community property state if one spouse bans or blocks the other spouse's access to income. Under the law, this is an illegal activity, and a spouse can’t take part of his or her income and hide it in such a way that the other spouse can’t get to it. It’s permissible for spouses to have separate bank accounts, but theoretically each spouse should be able to access the other’s account.
Community income becomes a huge issue during a divorce. In a community property state, any possessions acquired within the marriage are split 50/50, but another consideration is child and spousal support. Spouses may have entitlement to live to the standards they lived within the marriage, so that high community income during it, might suggest alimony of higher than usual rates, even if the spouse receiving it never contributed to the marital income.
The 50/50 split of assets may not be exactly even, particularly if one spouse didn’t work. Continued income of the working spouse might need to make up alimony payments or spousal support. Additionally, certain kinds of income beyond the paycheck may in part belong to each spouse. Contributions to retirement accounts established at work could be part of community income, and access to things health insurance coverage from work might count too. Divorced spouses may even get a part of pension plans at a later point, especially if they don’t remarry, because contributions to the pension were earned within the marriage.
There is usually only one way to try to effect a different splitting of community income after a divorce, which may be tried by people who make very large incomes. Creating an airtight prenuptial agreement that specifies exact percentage of the income to which a spouse would be entitled after divorce can help change the way property is split. The spouse who does not make as much money must decide if such an agreement is fair or equitable and should have legal advice on whether such a decision represents his or her best interests. It should also be noted that not all regions have community income laws, and the 50/50 entitlement can’t be expected everywhere.