Characterization of Separate Property Within the Community Property Systems of the United States and Italy: an Ideal Approach?

• Citation: Vol. 19 No. 1
• Publication year: 2015

Gonzaga Journal of International Law Volume 19 - Issue 1 (2015 - 2016)

CHARACTERIZATION OF SEPARATE PROPERTY WITHIN THE COMMUNITY PROPERTY SYSTEMS OF THE UNITED STATES AND ITALY: AN IDEAL APPROACH?

Stefania Boscarolli

I. INTRODUCTION

Italy and some U.S. states follow a similar community property regime for the division of property between spouses. Nonetheless, U.S. community property systems represent a minority approach. In only nine states do spouses own their property as community property, with the majority of states following a separate property -or common law- system.(fn1)

De facto, these American community property states share common origins and traits with the Italian system.(fn2) At the same time, the community property approaches in the two countries show significant differences, one of which pertains the characterization of separate property. Italy and the American community property states characterize separate property through different approaches and policies. The latter plays an important role in influencing the different definitions of separate property in the two countries.

With this in mind, this article represents an opportunity to reflect on the positive and negative aspects of each of the two approaches to community property regime in general and the characterization of separate property in particular. This article proposes a possible way to harmonize the two systems. The combination of the advantageous aspects of the American and the Italian definitions of separate property may result in an ideal model for future reforms.(fn3)

This article further offers a comparative overview of the characterization of separate property, within the systems that follow a community property regime. After a brief overview of the characteristics of both the Italian and the U.S. community property systems, Part III reviews community property in general, considering its origins. Part IV discusses in more depth property characterization in the two countries, looking at the reasons for and examples of the different characterizations. Likewise, it will consider the implication of each approach on other areas of law in order to identify possible weaknesses and strengths of the systems. Finally, this article will show why revising the characterization of separate property in the two community property systems is desirable. While U.S. jurisdictions should envision a broader characterization of separate property, the Italian system should do the opposite and favor the community property pool.

First, the Italian system could be revised to simplify some distinctions between separate and community property. This could be accomplished by eliminating some nuances, as well as the tripartition of immediate, residual community, and separate property. It should also adopt the flexibility of the American system with regard to marital agreements.

Second, the presumption for community property should encompass broader aspects of community life. Third, a possible reform of the regime should underline the principles of a community property regime. Finally, the basis for the characterization of the property should give more attention to the source of property, rather than its use.

The American system could also be modified. Although the presumption should be in favor of community property, based on the source of funds used to acquire property, the American system should give more recognition to a characterization of property based on its nature. Second, an ideal system could also acknowledge the importance of strictly personal property. The American system could consider strictly personal property as separate property, introducing a characterization method based on the use of the property. Finally, property management in the United States should better reflect the policies of community property system.

Further, in order to avoid inefficiencies related to the proof of property use, for personal or family needs, the systems should define strictly personal property. This would limit the property characterization based on the use and nature of the asset to specific items and instances.

II. GENERAL LEGAL FRAMEWORK

A. Basic Terminology

Some basic definitions and a comparison will provide the framework for a better understanding of these community property systems. Community property, also referred to as "marital property," is a matrimonial regime, based on which each spouse owns an undivided half of the property acquired during the marriage.(fn4) Such property is divided at the time of the termination of marriage and at the death of one spouse.(fn5)

The law generally characterizes gifts and inheritance, along with any property owned before marriage, as separate property, unless spouses convert it into community property.(fn6) Separate property is also property acquired with the exchange of separate assets.(fn7)

The Italian system also provides for a type of property owned by spouses that is different from anything recognized in the U.S. community property jurisdictions. This is residual or postponed community property. This category of property includes some specific assets that fall into the community only at the time of the termination of the regime and only and to the extent to they are left over and have not been consumed during marriage.

It is possible to look at the systems through an overall comparison:

United States	Italy
Community property	1. asset acquired during marriage is not separate property 2. income from community property 3. in some states, the income earned during the marriage from separate property 4. asset acquired in exchange of community property	1. asset acquired during marriage not including that is not separate property 2. earnings of separate property of each spouse, if not consumed at the termination of the regime 3. earnings of separate business of one spouse, if not consumed at the time of termination of the regime 4. business managed by both spouses and created after marriage 5. income and appreciation of business of one spouse created before marriage but jointly managed. 6. asset used for the business of one spouse created after marriage(fn8)	Note: Residual Community Property inItalics.
Separate property	1. asset owned before marriage 2. asset acquired by one spouse during marriage by gift or inheritance 3. damages for personal injury 4. asset agreed to be separate property 5. asset acquired through an exchange of separate property(fn9) 6. asset owned before marriage 7. asset acquired by one spouse during marriage through gift or inheritance if not otherwise provided 8. asset of strictly personal use of each spouse and its accessories 9. asset for the profession of one spouse, unless relating to management of a community business 10. damages for personal injury and compensation for labor injury 11. asset acquired through an exchange of separate property if so expressly indicated by the spouse(fn10)

B. Principles and Policies Underlying Community Property Systems

Principles and policies, together with history and legal tradition, provide the framework for the adoption and construction of a particular system of property among spouses.(fn11) Although there are different nuances and variations, community property greatly resembles the model of a business partnership. In fact, it implements a partnership theory of marriage.(fn12) Community property creates a system in which each spouse economically contributes to the success of the family unit.(fn13) The partnership model expresses, in its turn, the idea of union between spouses: a family union.(fn14) For this reason, in some aspects community property system are strictly connected to the business field of law: first, in terms of property sharing as co-owners;(fn15) second, in terms of division of the fruits and increase in values.(fn16)

The marital community differs from an ordinary business partnership with regard to the goals, distribution of gains, and claims of one member against the other.(fn17) First, while a partnership in general primarily operates to make profit,(fn18) a marital community operates for a more varied set of reasons. Moral and social values also enrich the economic principles of partnership in the marital community.(fn19) As partners, husband and wife share their efforts and resources. Marital sharing drives the community property regime.(fn20)

Second, unlike in a partnership, where partners divide the profits in proportion to the investment of each,(fn21) in communal property, spouses equally share the gains of the community.(fn22) Last, a partner in a business may not be able to claim a share after a continued absence,(fn23) whereas absence of husband or wife may not affect their rights.(fn24)

From a different point of view, the community property system also encompasses a protective role.(fn25) This protective role of community property is generally noticeable at the termination of marriage.(fn26) This is especially true on the death of a spouse, when such system provides economic protection to the surviving spouse.(fn27)

Together with sharing, equality is an essential element of the community partnership model.(fn28) The idea is...