When it comes to marriage and owning property, U.S. states are divided into two categories: community property and common law property systems. These two systems can lead to very different consequences for couples when confronted with divorce or the death of a spouse. How does your state determine your property rights within your marriage?
Below, find a breakdown of the differences between community property and common law property or “equitable distribution” states, and what system your state follows.
Common Law Property or “Equitable Distribution” States: What You Need to Know
The majority of U.S. states follow the common law or equitable distribution property system. In fact, only nine states follow the community property system: Arizona, California, Idaho, Louisiana, Nevada, New Mexico, Texas, Washington, and Wisconsin.
Under the common law or equitable distribution property system, followed by states such as Florida and New York, assets belong solely to the spouse who acquired them. Thus, these assets are generally not split equally, or “50/50,” between married couples upon divorce or the death of a spouse. Put simply, property ownership depends on whose name is on the title of the property, or who paid for it. If only your spouse’s name is on the title of a house—it is probably considered theirs alone, absent other legal considerations.
Moreover, property owned by a spouse before the marriage remains their separate property unless it is (1) “commingled” with marital property or (2) intentionally converted into marital property. Commingling happens when non-marital property is mixed with marital property and is consequentially treated as a marital asset. Pre-marriage property could be commingled with marital property when marital funds (like a joint bank account) are used to pay off mortgage payments, or when marital funds are used to substantially renovate the property, increasing its value. However, a finding of commingling is decided on a case-by-case basis.
Meanwhile, pre-marriage property may be intentionally converted into marital property when it is converted to a “tenancy by the entirety,” a type of joint property ownership for married couples where both spouses own 100% of the property.
So, what happens in a divorce in a common law property state? Nonmarital assets, such as property bought before marriage or property titled to just one spouse, are usually set apart to each individual spouse (unless an exception, like those described above, applies). Meanwhile, marital assets, such as property acquired during marriage, are separated “equitably” (not equally!) upon divorce. This division is subject to different percentages and is based on different factors such as each spouse’s contributions during the marriage, their individual economic circumstances, and how long the marriage lasted.
The death of a spouse in a common law property state brings different rules, too. Upon the death of a spouse, property not held in a tenancy by the entirety—the decedent’s individually-owned property, such as that acquired before marriage—becomes part of the decedent’s probate estate. Therefore, this property will likely not automatically pass to the surviving spouse, and is generally subject to the state’s laws of succession. However, if the property was held as a tenancy by the entirety, it will pass to the surviving spouse.
How Do Community Property States Differ?
As previously stated, Arizona, California, Idaho, Louisiana, Nevada, New Mexico, Texas, Washington, and Wisconsin follow the community property system, which differs from the common law property system in several ways.
Under the community property system, all property acquired during marriage—while domiciled in a community property state—is generally divided equally (50/50) between spouses upon divorce or death. So, unlike common law property states, property acquired during marriage by either spouse is subject to an equal split. Think, “What’s mine is yours,” or at the very least, “ours.”
This rule applies unless there is a written agreement between the spouses to divide the property differently. However, community property does not apply to property owned before marriage, or acquired after marriage by gift or inheritance.
So, what happens if you get a divorce in a community property state? Property acquired during the marriage is typically divided equally, or 50/50. As mentioned previously, this does not apply to property acquired before marriage or when couples have drafted a written agreement to divide their property differently.
Moreover, quasi-community property—property acquired by a married person while living in a non-community property state—is also generally divided equally upon divorce or death. Community property states treat out-of-state, separately-owned property—“quasi-community property”—as community property once the couple moves to that state. However, this only typically comes up during divorce proceedings or the death of a spouse.
If a spouse dies in a community property state, one-half of the community property automatically belongs to the surviving spouse, and the other half belongs to the decedent, unless the couple agreed in writing to divide the property differently. If the decedent dies without a will, the surviving spouse is typically entitled to inherit the decedent’s half of the community property under the state’s intestacy laws.
If you have questions or would like to learn more about marital property rights, do not hesitate to contact one of our experienced business attorneys at EPGD Business Law in Miami, Florida. Call us at (786) 837-6787 or email us to schedule a consultation.
