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Community Property: A Definition

Ashley Chorpenning3-minute read

November 27, 2020

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Depending on what state you live in, your assets might automatically be considered shared with your spouse. If you live in a community property state, any income, real estate, or other property acquired by either spouse during the marriage belongs to both spouses. Under community property laws, both spouses own everything equally, regardless of who purchased it or earned the income.

What Is Community Property?

In states where the law applies, community property refers to assets acquired during a marriage by either spouse. These assets can include property, income and even debt. Under community property laws, these assets are jointly owned by the married couple.

For example, let’s say that a couple gets married and purchases a home. The home would be considered community property in some states. 

In states where the law applies, community property refers to assets acquired during a marriage by either spouse. These assets can include property, income and even debt. Under community property laws, these assets are jointly owned by the married couple.

For example, let’s say that a couple gets married and purchases a home. The home would be considered community property in some states. 

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What Is A Community Property State?

Community property acknowledges that each spouse contributes to a relationship in different ways and exists to protect spousal rights.

Which States Are Community Property States?

Nine states have community property laws:

  • Arizona 
  • California
  • Idaho
  • Louisiana 
  • Nevada
  • New Mexico
  • Texas
  • Washington
  • Wisconsin

Alaska, while not one of the nine community property states, offers community property as an option for a married couple to include in a written contract, and it’s not mandatory like in the other states.

Community Property Management

Community property laws manage assets between married couples. Examples of community property and when it will need to be divided include when couples have separate property, in the event of a separation or divorce, if one spouse dies, and if there is joint tenancy between the spouses.

Separate Property

Separate property is real or personal property that belonged to one of the spouses before the marriage. It can also be a property gifted to one spouse or inherited by one spouse – gifts or inheritances given to either spouse during the marriage fall under separate property for the receiver.

Separation And Divorce

Separation or divorce still leaves each spouse with an equal claim to an asset. In a court proceeding, an asset like a house may be awarded to one spouse while the other receives assets of a value equal to half that of the house. To refinance after a divorce, both individuals need to reach an agreement to have one remove their name from the mortgage.

Death Of A Spouse

When one spouse dies, all marital property goes to the surviving spouse. Each community property state has varying laws, so it’s crucial to understand if your state is a community property state and what actions you need to take to ensure that all property is listed correctly. If a life estate plan were not made for separate property, ownership would be determined by a probate process rather than automatically transferred to the surviving spouse’s name.

Joint Tenancy (And Right Of Survivorship)

Some community property states offer married couples a joint tenancy right of survivorship agreement. Joint tenancy right of survivorship means a surviving spouse is the sole inheritor of property in the deceased spouse’s will. It’s essential to speak with your financial advisor or attorney about your state’s joint tenancy laws.

Bottom Line

Understanding your state’s community property laws is essential. If you get divorced or one spouse dies, community property laws will dictate the legal division or property acquisition. Each state has unique community property laws, so be sure to review your state’s laws before creating an estate plan.

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Ashley Chorpenning

Ashley Chorpenning is an experienced financial writer. In addition to being a contributing writer at Rocket Homes, she writes for solo entrepreneurs as well as for Fortune 500 companies. Ashley is a finance graduate of the University of Cincinnati. When she isn’t helping people understand their finances, you may find Ashley cage diving with great whites or on safari in South Africa.