What Is a Community Property State?

At first glance, it may seem like splitting your belongings straight down the middle during a divorce is the simplest, fairest way to handle the division of assets. And, if you live in a community property state, that's exactly what will happen.

Sometimes, however, "equal" doesn't always mean "fair," especially in situations where one spouse contributes significantly more to the marriage, either financially, emotionally, or otherwise.

What is community property?

At its core, community property law is the belief that both people in a marriage should be considered equal partners and, therefore, are entitled to equal shares of any property acquired during marriage (commonly referred to as community property assets).

When states recognize community property law, they typically do so because of a long history of civil laws promoting equality between spouses. This philosophy sharply contrasts with common law property states, where financial assets are distributed equitably during divorce—with a smaller or larger share given to each partner depending on income and individual "ownership" of specific items.

Community property laws: Highlights

• Equal ownership: In community property states, spouses have equal ownership of all property acquired during the marriage, with a few exceptions.
• Debt liability: Debts acquired during the marriage are equally shared by both spouses, regardless of that debt's source.
• Separate property: Property owned by one spouse before the marriage began is typically considered separate property.
• Division upon divorce: Community property states use equal distribution—not equitable distribution.

Every community property state in 2024

As of 2024, there are nine community property states, with no obvious sign that additional states are likely to adopt the practice:

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

Alaska, while not a community property state by default, allows couples to choose whether or not to divide their assets according to community property laws.

If you live in any of these nine states, you may want to consider exploring a prenuptial agreement before tying the knot. Without one, any assets considered community property will be split equally in the event of a divorce—no matter which spouse they "belonged" to during the marriage.

What community property doesn’t include

Community property laws apply broadly to most things couples acquire during their marriage, with a few notable exceptions. This is known as separate property and includes things such as:

• Gifts: When a gift is given specifically to one spouse, either before or during the marriage, that gift is usually exempt from community property law. This includes gifts given from one spouse to the other.
• Inheritances: Similar to gifts, inheritances realized before or during marriage are kept separate from marital assets.
• Pre-marriage assets: Unless converted to marital property, any assets owned entirely by one spouse before marriage will not be divided during divorce.
• Personal injury awards: If one spouse is injured, most types of compensation for that injury are considered separate property. That said, awards intended to cover lost income, medical expenses, or other economic losses due to the injury are considered community property.
• Property acquired after legal separation: Once you and your partner have begun the process of separating, any assets acquired will not qualify as community property.

3 scenarios where separate property can become community property

Sometimes, assets that start out as separate property can transform into community property. In addition to complicating divorce negotiations, it can also cause conflict when property one spouse thought was "safe" is suddenly fair game to be split in half.

Here are three of the most common situations where separate assets become community property:

1. Commingling of assets: When separate property is added to a pool of existing community property, such as depositing the money from an inheritance into a joint bank account, that separate property may become fair game under community property law.
2. Improvements made with community funds: For instance, you and your spouse use marital funds to build an addition to the cabin one of you owns separately. Any increase in the value of that cabin would be considered community property during divorce.
3. Modifying deeds: Any situation where you would add your spouse to the deed of a separate property, such as to increase the strength of your application when applying for a new loan or refinancing, may mean that the property then becomes community property.

Community property states vs. common law states

Of the 50 states, only nine are community property states, with the remainder following common property law (and Alaska squarely in the middle). When comparing the two, there are some stark differences to consider.

Ownership and control of property

Who owns what in a marriage is a much simpler question in community property states. Whether that's a good thing is up to you.

Community property states: All income, property, and most other types of assets acquired during the marriage are considered marital property, meaning it's split 50-50.

Common law states: Ownership of property comes down to whose name is on the title or who originally purchased a particular asset. If spouses purchase something jointly or both have their name on the deed, each person gets a share of ownership relative to how much they contributed to purchasing it.

Division of assets

Divided assets during a divorce are also much simpler under community property law.

Community property example: All marital property, regardless of who purchased it or has their name on the deed, is shared equally between spouses. During a divorce, the value of such property is split squarely down the middle.

Common law example: Division of assets is tied directly to ownership. If, for example, a woman buys a car with her individual bank account and has only her name on the deed, her spouse would have little or no claim to that car when negotiating a divorce.

Debt ownership

In some ways, debt is as much a type of "property" as any other—and who gets it is always an important question.

Community property states: Just like any assets acquired during a marriage are equally owned by each spouse, so too are debts incurred during that period. This includes school loans, medical debts, and even debts incurred without one spouse's knowledge.

Common law states: Unless one spouse co-signs for the other, all debt is individually owned under common law. One notable exception is debt incurred to cover family necessities, such as repairing a family home.

Estate planning

When dealing with community property, estate planning is an especially important topic. Here's how it differs between the two types of states.

Community property states: When one spouse dies, their 50% "share" of the community property is usually transferred to the surviving spouse. This can change, however, depending on the contents of the deceased's will or other estate planning documents.

Common law states: Wills have the first and strongest say over what happens to a deceased spouse's individual assets. In situations where there is no will, or it doesn't cover a specific piece of property, ownership of that property is passed on according to the state's intestacy laws.

Other things to consider about community property

If your primary residence is within one of the nine community property states, there are a few things to remember when trying to protect your assets and legacy.

Prenuptial agreements

On the whole, a valid prenup will almost always override community property laws. This is because a valid prenup, by definition, is a binding legal contract between two consenting adults.

Instead of abiding by community property rules, couples can agree on how all types of assets should be divided in the event of a divorce. Typically, this type of agreement is included in a prenup or, more rarely, in a postnup (although the two function almost identically). Writing a prenup with your spouse can help protect assets intended for certain dependents, items with sentimental value to one spouse, and even businesses.

Assets in multiple states

If you own property in multiple states, either individually or as a couple, it can make divorce negotiations especially complicated. Usually, the ownership of a property will be decided by the laws of the state in which it's located, but even that may change depending on a wide range of factors.
Because of this complexity, it's always better to consult an experienced legal professional when deciding how to best protect out-of-state assets.

FAQs

Is a prenup valid in a community property state?

Not only are prenups valid in community property states, but they're also often more valuable than they would be in a common law state. This is because community property laws dictate that marital property should be split 50-50 during divorce.

Can separate property become community property?

Either deliberately or accidentally, there are several ways that your separate property from before the marriage could become community property laws.

How can I protect my separate property in a community property state?

The answer here is simple but requires a little awareness: Don't let it become marital property.  Separate property is protected by default under community property laws and only becomes shared under certain circumstances, like those listed above.

What is a community property trust?

One of the key benefits of living in a community property state is the ability to avoid capital gains tax on property acquired after the death of your spouse. Historically, these benefits were lost to couples that moved from a community property state to a common law state. A community property trust is a way for such couples to set aside assets when they move and maintain the taxation benefits of community property laws.