# Marital Property: Common Law vs. Community States Explained

> **Definition**
>
> Marital property under U.S. law is defined as assets acquired during a marriage which are subject to division in the event of divorce.

## What Is Marital Property?

Marital property refers to what a couple acquires during marriage. Property owned before marriage, along with inheritances or gifts received during marriage, is separate property. Marriage partners may choose to exclude certain property from marital property by signing a [prenuptial](https://www.investopedia.com/terms/p/prenuptialagreement.asp) or a [postnuptial agreement](https://www.investopedia.com/articles/personal-finance/070815/postnup-vs-prenup-how-they-differ.asp).

Some details won't affect couples unless they divorce or one spouse dies. It's crucial to understand different types of marital property to make informed decisions about ownership when acquiring assets like real estate. All states are characterized as either common law or community property so it's important to determine which law your state observes.

### Key Takeaways

*   Marital property includes assets acquired during a marriage, excluding individual inheritances and gifts.
*   In common law states, property belongs to the spouse whose name is on the title.
*   Community property states consider all assets acquired during marriage as jointly owned by both spouses.
*   Prenuptial and postnuptial agreements can alter how marital property is categorized and divided.
*   Divorce courts use equitable distribution in non-community property states and may deviate from equal division in community property states due to misconduct.

## Detailed Insights Into Marital Property

Marital property includes real estate and other property a couple buys together during their marriage, such as a home or investment property, cars, boats, furniture, or artwork, when not acquired by either as separate property. Bank accounts, pensions, securities, and retirement accounts are also included; even an Individual Retirement Account, which is individually owned by law, is marital property if earned income is contributed to it during the course of a marriage.

The state where a couple permanently lives, whether common law [common law](https://www.investopedia.com/terms/c/common-law.asp) or community property, determines how marital property laws apply and how assets are divided in divorce..

## Comparing Common Law and Community Property States

Which type of state you live in generally determines what is considered to be marital property.

### How Common Law Property States Work

Most states are common law property states. In common law states, property acquired by one spouse is solely theirs. If both spouses' names are on the title, the property belongs to both, with each having a half-interest. If a wife buys a car and lists only her name, she owns it solely. If she buys the car and puts it in both her and her husband's names, however, the car belongs to both of them.

Under common law, when one spouse passes away, their separate property is distributed according to their will—or according to probate, if there is no will in effect. How this distribution pans out depends on [which type of legal ownership the spouse has in any marital property](https://www.investopedia.com/articles/mortgages-real-estate/08/title-ownership-property.asp). If they own property in "[joint tenancy with the right of survivorship](https://www.investopedia.com/terms/j/jtwros.asp)" or "tenancy by the entirety," the property goes to the surviving spouse. This right is independent of what the deceased spouse's will says. However, if the property was owned as "[tenancy in common](https://www.investopedia.com/terms/t/tenancy_in_common.asp)," then the property can go to someone other than the surviving spouse, per the deceased spouse's will. Not all property has a title or deed. In this case, generally, whoever paid for the property or received it as a gift owns it. In a legal separation or divorce in a common law state, the court can decide how marital property is divided according to its laws.

### Exploring the Rules of Community Property States

Arizona, California, Idaho, Louisiana, Nevada, New Mexico, Texas, Washington, and Wisconsin are all [community property states](https://www.investopedia.com/personal-finance/which-states-are-community-property-states/). These nine states follow the rule that all assets acquired during a marriage are owned equally by both spouses. The IRS states that Tennessee, South Dakota, Alaska, and Puerto Rico have elective community property laws.

> **Important**
>
> Alaska has an "opt-in" community property law that allows such a division of property, providing both parties agree. Tennessee, South Dakota and the Commonwealth of Puerto Rico have passed similar laws.

Marital property in community property states is owned by both spouses equally. This marital property includes earnings, all property bought with those earnings, as well as all debts accrued during the marriage. Earnings and debts acquired before the marriage are separate property, as is an inheritance of only one spouse, although the couple may co-mingle property if they choose. Couples residing in community property states have to account for their [community income](https://www.investopedia.com/terms/c/communityincome.asp) as well as their separate income if they file separate federal tax returns. When one spouse dies, title of joint assets goes to the surviving spouse.

Community property begins at the marriage and ends when the couple physically separates with the intention of not continuing the marriage. Therefore, any earnings or debts originating after separation are considered separate property.

## Navigating Divorce: Handling Marital Property

If the couple divorces or obtains a legal separation and the former spouses can't decide how to divide their marital property, a court will decide for them. In non-community property states, assets are divided according to "equitable distribution." In community property states, there are some exceptions to the equal division rule, including where a spouse misappropriates marital property before or during a divorce.

Of course, the couple can enter into a prenuptial agreement before the marriage, explaining how to distribute the marital property upon divorce. Usually, if the prenup is valid and doesn't violate federal or state laws, it will be followed—even in community property states.

## The Bottom Line

Common law and community property states regard ownership and division of marital property quite differently. Most states adhere to common law, while nine specific states follow community property laws. It's important to understand state-specific marital property laws for future decisions about property ownership and division, especially in the event of divorce or death.

Legal agreements, such as prenuptial and postnuptial arrangements, can also affect the distribution of marital property and can override state law in some cases. Consulting with an attorney or a professional advisor to make informed decisions regarding your property.

> **Article Sources**
>
> 1.  American Bar Association. "[Separating Property](https://www.americanbar.org/groups/legal_services/milvets/aba_home_front/information_center/family_law/marriage_and_divorce/annulment_separation_divorce/separating_property_awarding_alimony/separating_property/)."
>     
> 2.  FindLaw. "[Marital Property Basics: Property Before, During and After Marriage](https://www.findlaw.com/family/marriage/what-s-mine-is-mine-what-s-yours-is-mine-who-owns-what-in.html)."
>     
> 3.  American Bar Association. "[The Probate Process](https://www.americanbar.org/groups/real_property_trust_estate/resources/estate-planning/probate-process/)."
>     
> 4.  Internal Revenue Service. "[Publication 555, Community Property](https://www.irs.gov/publications/p555)."
>     
> 5.  McConnell Valdés LLC. "[New Civil Code of Puerto Rico: Institution of Family](https://www.mcvpr.com/newsroom-publications-New-PR-Civil-Code-Family-Institution)."
>     
> 6.  Hekmat Law & Mediation P.C. "[Community Property States \[Full List & Why It Matters\]](https://hekmatfamilylaw.com/guides/community-property-states-full-list/)."