Definition and Examples of Community Property under Common Law
How Does the Community Property System under Common Law Work?
Types of Community Property under Common Law
Community Property under Common Law vs. Community Property
Definition and Examples of Community Property under Common Law
Community property under common law refers to property that both spouses are entitled to during the marriage. The community property system under common law emphasizes that each spouse is an independent individual entitled to exclusive ownership of certain assets acquired during the marriage. Community property under common law is often compared to community property, which follows different rules of ownership.
How Does the Community Property System under Common Law Work?
Most states in the United States have adopted the community property system under common law. Only nine states — Arizona, California, Idaho, Louisiana, New Mexico, Nevada, Texas, Washington, and Wisconsin — use the community property system.
Under the community property system, each spouse is considered a separate individual entitled to their own property. This means that any income earned and any property acquired belongs to the spouse whose name is on the check or title of the property.
This includes non-community property, such as property acquired before marriage or gifts received by one spouse during the marriage. An exception to exclusive ownership occurs when both spouses’ names appear on the property documents, as illustrated in our earlier example about a car title.
Types of Community Property under Common Law
Community property under common law generally includes tangible assets, income, and debts.
Assets and Tangible Property
The person whose name appears on documents like the deed to a house or car title is the sole owner of that property. If there are no documents, the spouses may share community property.
Income and Earnings
In community property states under common law, each spouse is entitled to be the sole owner of any income earned during the marriage. This includes income generated from assets exclusively owned by one spouse, such as real estate that they own solely.
Debts
In community property states under common law, spouses do not share ownership of debts acquired during marriage on a 50-50 basis. If one spouse passes away, the surviving spouse is generally not responsible for paying off the deceased spouse’s debts, unlike in some community property states.
Community Property under Common Law vs. Community Property
Community property under common law considers each spouse in the marriage an independent individual entitled to separate legal rights and property ownership. In contrast, spouses in community property states are viewed as partners who share legal and property rights. Spouses in community property states own a shared 50% interest in assets and debts, regardless of who acquired the item.
Sources:
Internal Revenue Service. “Publication 555: Community Property,” See Table 1. Accessed Jan. 6, 2022.
Internal Revenue Service. “Publication 555: Community Property,” See “Married individuals.” Accessed Jan. 6, 2022.
Wisconsin Department of Revenue. “Federal and Wisconsin Income Tax Reporting Under the Marital Property Act,” Page 4. Accessed Jan. 6, 2022.
The Judicial Branch of California. “Property and Debt in a Divorce or Legal Separation.” Accessed Jan. 6, 2022.
American Bar. “How Lenders Can Avoid Potential Pitfalls in Community Property States.” Accessed Jan. 6, 2022.
Consumer Financial Protection Bureau. “Can I Be Responsible to Pay Off the Debts of my Deceased Spouse?” Accessed Jan. 6, 2022.
Source: https://www.thebalancemoney.com/what-is-common-law-property-5215005
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