Community Property vs. Common Law States

Two Systems, Very Different Rules

How property and assets are owned during a marriage -- and divided in the event of divorce or death -- depends heavily on which state you live in. The United States has two systems: community property and common law (also called equitable distribution). The system your state follows affects everything from how bank accounts are titled to who has a claim on retirement benefits.

Community Property States

In community property states, most income earned and assets acquired during a marriage are considered equally owned by both spouses, regardless of whose name is on the account. If one spouse earns a paycheck and deposits it into an account in their name only, the other spouse still has a legal claim to half of that money. Property owned before the marriage and gifts or inheritances received during the marriage are generally considered separate property -- but commingling (mixing separate and marital funds) can blur those lines.

The community property states are Arizona, California, Idaho, Louisiana, Nevada, New Mexico, Texas, Washington, and Wisconsin. Alaska allows couples to opt in to community property rules.

Common Law States

In the remaining 41 states, the common law (equitable distribution) system applies. Under this system, the person whose name is on the account or title generally owns it. If one spouse opens a savings account in their name only, that account is legally theirs. However, in the event of divorce, courts in common law states divide property "equitably" -- which means fairly, not necessarily 50/50. A judge considers factors like the length of the marriage, each spouse's earning capacity, and contributions to the household.

Why This Matters for Account Titling

In a community property state, titling an account in one spouse's name does not necessarily protect it from the other spouse's claim -- the law considers marital earnings jointly owned regardless of the title. In a common law state, account titling carries more legal weight because ownership is tied more directly to whose name is on the account.

This also affects what happens at death. In community property states, the surviving spouse already owns half of community assets, and only the deceased spouse's half passes through their will or trust. In common law states, the distribution depends entirely on how assets are titled and what estate planning documents exist.

If you have moved from one type of state to another, or if you own property in a different state than where you live, the interaction between these two systems can create complications. This is one area where the specifics matter a great deal, and the rules are genuinely different depending on geography.