What Is Common-Law Property?

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DEFINITION
Common-law property refers to how ownership of property acquired during a marriage is determined. The common-law system asserts that each spouse is an individual entitled to sole ownership for certain items.

Common-law property refers to how ownership of property acquired during a marriage is determined. The common-law system asserts that each spouse is an individual entitled to sole ownership for certain items. Common-law property is often contrasted with community property, which follows different ownership rules.

Learn more about common-law property, how it works, and in which states the common-law property system applies.

Definition and Examples of Common-Law Property

Common-law property describes the property that each spouse is entitled to when it is acquired while married. The common-law property system applies in states that have adopted it. Unlike a community-property system, in which spouses share joint ownership, common-law property is often determined by who holds the title to any particular piece of property.

Consider this example. Let’s say Henry purchases a car under his name. Under a common-law property system, Henry is the sole owner of that car. However, if the car title included both Henry and his spouse, Julia, then both spouses share ownership.

How Does Common-Law Property Work?

The majority of states in the U.S. have adopted the common-law property system. Only nine states—Arizona, California, Idaho, Louisiana, New Mexico, Nevada, Texas, Washington, and Wisconsin—use the community-property system.

Under a common-law property system, each spouse is considered a separate individual entitled to their own property. That means any income earned and property acquired is owned by whichever spouse’s name is on the check or property title.

This includes non-marital property, such as property obtained before the marriage or gifts received by one spouse during the marriage. The exception to sole ownership is when both spouses’ names are present on the ownership documentation, as demonstrated in our earlier example with the car title.

Common-law property is often contrasted with community property. In community-property states, spouses share 50% joint ownership of assets, regardless of who acquired the piece of property.

To demonstrate the difference, let’s say Henry purchased a house under his name during the marriage. In a common-law property system, Henry is the sole owner of the house. In a community-property state, Henry’s wife, Julia, is a legal co-owner.

Moving Between Different Property Jurisdictions

If you were to move from a common-law property state into a community-property state, ownership of the marital property would change, depending on the state. In California, which is a community-property state, your individual property would now be considered “quasi-community” property. This includes earnings and real estate acquired in the common-law state.

According to California law, property acquired in a common-law property state that would have been classified as community property in California, had it been acquired there, becomes quasi-community property and is treated as community property.

For example, let’s say Henry purchased a car in Florida (common-law state) during his marriage and later moved to California (community-law state). The car would be considered quasi-community property. So, if Henry and Julia divorce, the car would be treated as community property in which both spouses share joint ownership.

Types of Common-Law Property

Common-law property generally encompasses physical possessions, earnings, and debt.

Physical Assets and Possessions

Whoever’s name is documented as the owner, such as the deed to a house or a title on a car, is considered the sole owner of that property. Absent any documentation, the spouses may share joint ownership.

Earnings, Income, and Wages

In common-law property states, each spouse has sole ownership over any income they earn during the marriage. This includes income earned from income-generating assets they solely own, such as rental properties.

Debts

Spouses in common-law property states do not share 50-50 ownership in debts acquired during the marriage. If a spouse dies, the surviving spouse is generally not obligated to repay outstanding debts belonging to the deceased spouse, unlike in some community-property states.

Common-Law Property vs. Community Property

Common-Law Property Community Property
Each spouse in a marriage is an individual with separate legal and property rights Spouses are considered partners and share legal and property rights.
Income is owned by the individual spouse and taxed separately Income is shared equally by both spouses and each spouse reports half of that income for taxes
Individuals are the sole holders of their own debt Spouses share debts
Common-law property is adopted by 41 states Community property is adopted by nine states: Arizona, California, Idaho, Louisiana, New Mexico, Nevada, Texas, Washington, and Wisconsin

Key Takeaways

  • Common-law property refers to how ownership of property is determined between spouses—spouses in common-law property systems are considered individuals with separate legal and property rights and enjoy full ownership over their property.
  • Common-law property can include real estate, vehicles, and earnings.
  • Unlike common-law property, which observes individual ownership, spouses in community-property states share joint ownership over assets and debts.
  • 41 states have adopted the common-law property system, while nine states (Arizona, California, Idaho, New Mexico, Nevada, Texas, Washington, and Wisconsin) use the community-property system.


Article Sources

  1. Internal Revenue Service. ”Publication 555: Community Property,” See Table 1. Accessed Jan. 6, 2022.

  2. Internal Revenue Service. ”Publication 555: Community Property,” See “Married individuals.” Accessed Jan. 6, 2022.

  3. Wisconsin Department of Revenue. “Federal and Wisconsin Income Tax Reporting Under the Marital Property Act,” Page 4. Accessed Jan. 6, 2022.

  4. The Judicial Branch of California. “Property and Debt in a Divorce or Legal Separation.” Accessed Jan. 6, 2022.

  5. American Bar. “How Lenders Can Avoid Potential Pitfalls in Community Property States.” Accessed Jan. 6, 2022.

  6. Consumer Financial Protection Bureau. “Can I Be Responsible to Pay Off the Debts of my Deceased Spouse?” Accessed Jan. 6, 2022.