Family law issue
Married couples usually own most, if not all, of their valuable property together. If you want to leave everything to your spouse, as many people do, you don’t need to worry about what belongs to you and what belongs to your spouse. If you’d rather divide your property among several beneficiaries, you’ll need to know just what’s yours to leave.
Common Law States
Most states, except those listed as community property states, below, use the “common law” system of property ownership. In these states, it’s usually easy to tell which spouse owns what. If only your name is on the deed, registration document, or other title paper, it’s yours. You are free to leave your property to whomever you choose, subject to your spouse’s right to claim a certain share after your death. (For more information, see Inheritance Rights.)
If you and your spouse both have your name on the title, you each own a half-interest in the property. Your freedom to give away or leave that half-interest depends on how you and your spouse share ownership. If you own the property in “joint tenancy with right of survivorship” or “tenancy by the entirety,” the property automatically belongs to the surviving spouse when one spouse dies — no matter what the deceased spouse’s will says. But if you instead own the property in “tenancy in common” (less likely), then you can leave your half-interest to someone other than your spouse if you wish.
If an item doesn’t have a title document, generally you own it if you paid for it or received it as a gift.
Community Property States
If you live in a community property state, the rules are more complicated. Community property states are Arizona, California, Idaho, Louisiana, Nevada, New Mexico, Texas, Washington, and Wisconsin.
States Where You Can Opt In
In Alaska, South Dakota, and Tennessee, spouses can opt in to the community property system and/or designate specific assets as community property.
In Alaska, spouses can opt in by creating a community property agreement that states all (or some) property and/or income acquired by the spouses during the marriage is considered community property. Spouses can also establish a community property trust which covers specific assets?all property transferred to that trust will be treated as community property.
In South Dakota, spouses may create a “South Dakota special spousal trust,” which must include a written declaration that the property is “community property.” Any property the spouses transfer to this trust will be treated as community property.
In Tennessee, spouses can create community property rights to property or assets that they transfer to a valid community property trust, but the requirements are more specific. The trust must:
include a written statement that the trust is a “Tennessee community property trust”
have at least one qualified trustee, whose powers include maintaining records for the trust and preparing or arranging for the preparation of any income tax returns that must be filed by the trust?both or either spouse may be a trustee
be signed by both spouses, and
contain the following language in capital letters:
THE CONSEQUENCES OF THIS TRUST MAY BE VERY EXTENSIVE, INCLUDING, BUT NOT LIMITED TO, YOUR RIGHTS WITH YOUR SPOUSE BOTH DURING THE COURSE OF YOUR MARRIAGE AND AT THE TIME OF A DIVORCE. ACCORDINGLY, THIS AGREEMENT SHOULD ONLY BE SIGNED AFTER CAREFUL CONSIDERATION. IF YOU HAVE ANY QUESTIONS ABOUT THIS AGREEMENT, YOU SHOULD SEEK COMPETENT ADVICE.
Community Property Laws
Generally, in community property states, money earned by either spouse during marriage and all property bought with those earnings are considered community property that is owned equally by husband and wife. Likewise, debts incurred during marriage are generally debts of the couple. At the death of one spouse, his or her half of the community property goes to the surviving spouse unless there is a valid will that directs otherwise.
Married people can still own separate property. For example, property inherited by just one spouse belongs to that spouse alone. A spouse can leave separate property to anyone?it doesn’t have to go to the surviving spouse.
Community Property Separate Property
Money either spouse earns during marriage Property owned by one spouse before marriage
Things bought with money either spouse earns during marriage Property given as a gift to just one spouse
Separate property that has become so mixed with community property that it can’t be identified and separate property that has been transmuted or transferred to the community Property inherited by just one spouse
Generally, these rules apply no matter whose name is on the title document to a particular piece of property. For example, a married woman in a community property state may own a car in only her name?but legally, her husband may own a half-interest. Here are some other examples:
Property Classification Why
A computer your spouse inherited during marriage Your spouse’s separate property Property inherited by one spouse alone is separate property
A car you owned before marriage Your separate property Property owned by one spouse before marriage is separate property
A boat, owned and registered in your name, which you bought during your marriage with your income Community property It was bought with community property income (income earned during the marriage)
A family home, which the deed states that you and your wife own as “husband and wife” and which was bought with your marital earnings Community property It was bought with community property income (income earned during the marriage) and is owned as “husband and wife”
A camera you received as a gift Your separate property Gifts made to one spouse are that spouse’s separate property
A checking account owned by you and your spouse, into which you put a $5,000 inheritance 20 years ago Community property (probably) The $5,000 (which was your separate property) has become so mixed with community property funds that it has become community property (but you may be able to prove the $5000 is your separate property with property documentation and evidence)
Changing the rules with a written agreement. Married couples don’t have to accept the rules about what is community property and what isn’t. They can sign a prenup, postnup, or other written agreement that makes some or all community property the separate property of one spouse, or vice versa.