Marital property is a U.S. state-level legal term that refers to property acquired during the course of a marriage. Property that an individual owns before a marriage is considered separate property, as are inheritances or third-party gifts received during the marriage. Marriage partners may choose to exclude certain property from marital property by signing a prenuptial or postnuptial agreement.
Some details of marital property won’t affect a couple unless they divorce or until one of them dies. However, understanding the different types of marital property is crucial. Being aware of how real estate or other assets are classified can help couples make informed decisions that truly reflect their intentions.
Key Takeaways
- Marital property refers to any property acquired by a couple during their marriage.
- The laws governing the distribution of marital property in the event of divorce depend on where the couple lives.
- In common law property states, property acquired by one spouse is considered their sole property unless the title or deed includes both names.
- Nine states follow community property laws, where marital property acquired during the marriage is owned equally by both spouses.
Understanding Marital Property
Marital property includes real estate and other assets a couple purchases together during their marriage, such as homes, investment properties, cars, boats, furniture, or artwork, unless it is classified as separate property. Bank accounts, pensions, securities, and retirement accounts are also marital property if earned income is contributed to them during the marriage.
This legal definition primarily exists to protect spousal rights. Whether a couple lives in a common law or community property state will dictate which laws govern their marital property and how it can be divided if the marriage ends.
Common Law Property States vs. Community Property States
Common Law Property States
Most states operate under common law property systems. Under common law, any property acquired by one spouse is owned solely by that person. If both spouses’ names are on a property title or deed, then both parties own the property equally. For example, if a wife buys a car and registers it in only her name, the car belongs solely to her. If she registers it in both names, the property is co-owned.
When a spouse passes away in a common law state, their separate property is distributed according to their will or through probate if no will exists. The distribution can vary depending on the form of legal ownership. If property is owned as “joint tenancy with the right of survivorship” or “tenancy by the entirety,” it goes directly to the surviving spouse, regardless of the will.
Community Property States
Nine states—Arizona, California, Idaho, Louisiana, Nevada, New Mexico, Texas, Washington, and Wisconsin—follow community property laws. These states consider all assets acquired during the marriage as community property, meaning they are equally owned by both spouses. Similar laws have been adopted in Alaska (opt-in), Tennessee, South Dakota, and the Commonwealth of Puerto Rico.
Community property includes earnings, assets bought with those earnings, and any debts incurred during the marriage. Earnings and debts acquired prior to the marriage remain separate, as do inheritances for one spouse. Couples in community property states must account for both their community and separate income if they file separate federal tax returns. When one spouse dies, the title of jointly owned assets generally transfers to the surviving spouse.
Community property begins with marriage and ends when the couple physically separates with the intention of not continuing the marriage. Earnings or debts incurred after separation are considered separate property.
Marital Property and Divorce
If a couple divorces or legally separates and cannot agree on property division, the court will decide for them. In non-community property states, assets are divided according to “equitable distribution,” while community property states generally divide assets equally. There are exceptions, such as instances where a spouse misappropriates marital property before or during the divorce.
A prenuptial agreement made before marriage can specify how to distribute marital property upon divorce. As long as the prenup is valid and does not violate any laws, it will be upheld, even in community property states.
Related Terms: prenuptial agreement, postnuptial agreement, equitable distribution, inheritance.
References
- The Law Dictionary. “What Is Community Property”? In re Lux’s Estate, 114 Cal. 73, 45 Pac. 1023; Mitchell v. Mitchell, 80 Tex. 101, 15 S. W. 705: Ames v. Hubby, 49 Tex. 705; Holyoke v. Jackson, 3 Wash. T. 235, 3 Pac. 841; Civ. Code.
- IRS. “Publication 555. Community Property”.
- Smith, Gambrell & Russell, LLP. “Why Worry About Community Property?”
- DivorceNet. “Property Division by State”.
- Hastings Law Journal. “The Definition and Division of Marital Property in California: Towards Parity and Simplicity”. Page 856.
