More from the community property question grab bag

While the last year has seen many, many questions from Registered Domestic Partners and same-sex spouses (more info on that), there are other scenarios when the community property rules have to be dealt with. A reader asks:

My Dad died in Nevada (…). He lived and worked in Illinois and was receiving a pension from Illinois prior to his marriage of 2 years. Is that pension considered community property in Nevada?

And I am the successor trustee of his trust can I file a 1040 in his name as married filing separate along with the estate tax return?

Every state’s community property laws can be a little different. One universal characteristic of community property states is that assets (such as a pension) acquired prior to a marriage or other community property relationship remain separate property unless action is taken to change the assets to community property. So a pension earned prior to a marriage would remain the separate property of the spouse who earned it.

The next step is how to treat the income from the asset. Most states that use community property law, including Nevada, treat the income from separate assets as separate property. (A few states treat all income as community income even if it’s from separate property. For example, Texas. More detailed information can be found, among other places, in this section of the IRS Audit Manual)

So a pension earned prior to a marriage in Nevada would remain the separate property of the person who earned it, as would all of the income from the pension. The income would not need to be divided with the spouse.

Regarding who files the return, the IRS says this can be “anybody who is in charge of the decedent’s property.” Generally this will be an executor or administrator of the estate. If a refund is due, you may be required to file Form 1310 to demonstrate you are the Personal Representative authorized to received the return. (More info)

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One Response to More from the community property question grab bag

  1. Donne says:

    Thank you so much. That is the clearest answer I have received.

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