A community property state is a state where any asset acquired during marriage is considered to be community property, equally owned by each spouse. Any income that either spouse makes during the marriage is community income. But there are exceptions that allow spouses to own assets separately from each other. Gifts, inheritances, and assets acquired before the marriage are all considered separate property.
There are only nine community property states, plus three states that allow residents to opt into community property law. The remaining 38 states plus Washington D.C. follow a common law property system where ownership of marital assets is more straightforward: whoever acquired the property owns it outright. (A couple can, however, choose to become joint owners, such as through a joint bank account.)
Whether or not you live in a community property state is important because it determines the division of property in the event of legal separation, divorce, or the death of a spouse. Because your spouse shares ownership of community property, when the marriage ends or if you die, they may still have a claim to a community asset even if you want to give it to someone else.
Marital property is something a couple buys during their marriage.
In a community property state, marital property becomes community property, which is jointly owned by both spouses.
In a common law state, marital property is owned by the spouse that bought it.
The division of community property, due to death or divorce, varies in each state.
Is my state a community property state?
There are nine community property states and three states that let married couples opt-in to community property. The rest of the states do not have community property and use common law instead.
A strong estate plan starts with life insurance
Get free quotes
*Community property law generally extends to people in a registered domestic partnership in these states.
Opt-in community property states
How community property works
In a community property state, marital property becomes community property, which is equally owned by both spouses 50-50 regardless of who paid for it or how it is titled. Marital property is any asset — real estate and personal property — that either spouse acquired during marriage, like a house or land rights, a car, furniture, and other tangible objects. Even income, money, investments, and retirement accounts can be marital property.
For example, if you are married and buy a house, it becomes community property. Even when you don't put your spouse's name on the deed, they still own half of the house. This could make it difficult to give away the house to someone else when you die, since your spouse retains partial ownership over it.
Another example: If you and your sibling buy a vacation home together your sibling owns a share, and you own the other share jointly with your spouse. Similarly, if you have a business partner, your spouse would only share in your half of the business interests.
It’s still possible to have separate assets, though, even in a community property state. (More details on community vs separate property in the next section.)
Keep in mind that whether or not you’re subject to community property law depends on the location of your permanent residence (your domicile) and not your actual assets. For example, if you live in California, and buy a boat or house in Florida (common law state) while you’re married, your spouse will still have joint ownership of it.
If you are planning to change your permanent residence from one type of state to another, you should consult with an estate-planning attorney (or a family law attorney) so they can help you correctly identify or convert the type of property you have.
Opting in to community property
If you live in Alaska, Tennessee, or South Dakota, where it’s possible to opt into the community property system, then you can designate some of your assets as community property. You may need to transfer these items into a trust, which may be called a community property trust, a special spousal trust, or a joint trust.
Common law states vs community property states
Common law and community property systems are different types of marital law, which determines who owns marital assets.
In a common law state, who owns marital property depends on who acquired or purchased it. Whatever each spouse acquired is solely their own. For example, you can buy a house and put your name on the deed as the sole owner. It does not belong to your spouse. You could also buy the house with your spouse and put both of your names on the deed. You can do the same thing for a car or bank account. (Owning an asset with someone else is known as joint tenancy.)
What do community property & separate property include?
When you live in a community property state, it’s important to be able to categorize what is community property versus separate property in the event of divorce or death. Here is a general overview of what’s community property versus separate property.
Community property vs separate property
|Community property||Separate property|
|Acquired during marriage||Acquired before marriage|
|Converted from separate property||Converted from community property|
|Anything you can't identify as separate property||Gifts and inheritances|
What is community property?
In a community property state, generally all property acquired during marriage is community property that belongs equally to both spouses. This includes money and income, which become community income or community funds, and anything purchased with it.
Separate property can also be converted into community property (through a proper form, like a community property agreement). Other assets that can’t be identified as separate property may be classified as community property.
What is separate property?
Everything you owned before marriage is considered separate property in community property states. Any gift or inheritance becomes the sole possession of the spouse who receives it, even if they're married. Property acquired after a legal separation or divorce is also separate property. You can also convert some community property into separate property, but this may require the services of a lawyer.
The following are treated as separate property:
Gifts or inheritances you received during marriage
Community property you made into separate property (by converting jointly owned to separately owned)
Property acquired after legal separation or divorce
Assets acquired with separate funds or separate income (like from selling separate property)
For more information on how specific property is treated, visit the IRS website or check your state law.
Ready to shop for life insurance?
Division of property in a community property state
It’s important to know how community property works if you live in a state that uses these laws because it informs how the property is distributed if you get divorced or either you or your spouse dies.
During a divorce, your state's marital laws will decide how community property is divided, either equally or equitably. Community property states use equal distribution, which means each spouse gets exactly 50% of the community property after a divorce, barring any legal agreements between the ex-spouses. Common law states generally use an equitable distribution system. In an equitable distribution state, assets are split fairly during a divorce.
If you die without an estate plan, then a probate court will determine your heirs. In a community property state, a surviving spouse is usually entitled to at least some of the marital assets when someone dies without a will. They may end up inheriting the deceased spouse’s separate property, too, (the intestate estate) when there is no will. (According to the Policygenius Estate Planning Survey, 21.5% of Americans believe everything will go to their spouse, which isn't always the case. Read more about the results.)
You can typically only give away your share of community property. This could pose a problem if you and your spouse have different beneficiaries in mind, so it’s important to create an estate plan that avoids future conflicts. If you and your spouse want to leave assets to different beneficiaries, consider speaking with an estate planning attorney to better understand your options. Things can get complicated quite easily, like in cases where you've title an asset as community property with right of survivorship — you can’t actually “will” away this asset because it passes automatically to your spouse.