A married person has two main types of property. First, they have their own separate property. Second, they have property they own jointly with their spouse. The distinction becomes very important in the case of a death or divorce, and there are two different ways for states to make this distinction.
Most states – Common law ownership by title
In most states, property is owned by title. This is the “common law,” or traditional, rule. That means, for example, that if a car is titled only in the husband’s name then the husband owns it 100%. The spouse that has title over the property can freely sell or give it away. Typically, big items like a car or house will be jointly owned, while smaller items like a laptop computer will be presumed owned by one spouse. Spouses should make sure their name is on any property they expect to share.
Community Property States includes: Arizona, California, Idaho, Louisiana, Nevada, New Mexico, Texas, Washington, and Wisconsin.
In a community property state, almost everything acquired by either spouse during the marriage becomes community property that they both own equally. This includes all earnings from work and any debt incurred, as well as anything purchased with those earnings or debt. Gifts and inheritance usually stay separate. Property each spouse owned before the marriage is separate, but if that property gets commingled into the marital property, it can become part of the community property. During the marriage each spouse has a say in the management of the community property, meaning that one spouse could not sell off a car that is only titled in his or her name without permission.
Division at death or divorce in common law jurisdiction
When one spouse dies, any property owned jointly immediately becomes completely owned by the surviving spouse. There are no taxes or other formalities involved with the transfer of the property. Any property held separately by one spouse will transfer according to the deceased person’s will or if the deceased had no will then usually the separate property will go to the surviving spouse under state statute.
A divorce works similarly. Any joint property will need to be split between the spouses, but each spouse can keep their separate property. When dividing assets most courts will take separate property into account. For example, if one spouse has sole ownership over a very expensive sports car purchased during the marriage then the court may give a larger share of the jointly-owned marital property to the other spouse.
Division at death or divorce in a community property state
When a spouse dies in a community property state the surviving spouse will keep half the estate while the deceased spouse’s half will be passed according to the deceased spouse’s will. If there is no will, then the deceased spouse’s half will generally go to the surviving spouse and that means the surviving spouse will keep all community property. In a divorce, the spouses will generally be granted equal shares of the community property.