State Community Property Laws: Coping With Federal Tax and Pension Laws

The major thrust of this Article will deal with the question of the preemption of state law by federal law due to the supremacy clause of the United States Constitution. I will examine specific situations in which a particular federal statute is granted such legal significance and weight that it sets aside the normal community property concepts which we would otherwise expect to control in such a factual setting. This article will generally treat these issues in the context of an employee-spouse and the nonemployee-spouse proceeding with a dissolution of their marriage in a community property state.

Assume the nonemployee-spouse at the time of the dissolution is requesting a one-half interest in the retirement plan due to the fact that it is community property (not preempted by any federal law); and, further asserts that recognition of the community property interest, the nonemployee-spouse’s one-half interest should be paid directly to such spouse. The employee-spouse responds by stating that the federal law preempts state community property law; thus, the benefits are the employee-spouse’s separate prop- erty. Further, any division or allocation of retirement benefits would be in violation of the nonalienation clause as outlined in the federal law which pertains to the particular retirement plan.

In some cases federal law will not preempt community property law, and in those particular cases, the concern is with both the procedural issues and the tax law issues which surface when a pension benefit, having the status of community property, is either divided between two spouses or assigned entirely to one particular spouse.

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Timothy W. Quirk, State Community Property Laws: Coping With Federal Tax and Pension Laws, 19 Gonz. L. Rev. 481 (1983).

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