Marital Property

What is marital property?

Marital property is a legal term used in U.S. state law to describe assets and debts acquired during a marriage that are treated as owned by the marital unit. The rules that determine what counts as marital (vs. separate) property — and how it’s divided on divorce or death — depend largely on which state you live in.

Key takeaways

– Marital property generally includes earnings, assets bought with earnings, retirement accounts funded with earned income, bank accounts, and debts acquired during the marriage.
– Separate property usually includes assets owned before marriage, gifts or inheritances to one spouse, and assets acquired after legal separation (or after divorce).
– Most states follow common law (equitable distribution). Nine states follow community property rules that generally split marital property 50/50.
– Titling, commingling, prenuptial/postnuptial agreements, beneficiary designations, and the state’s ownership rules all affect what is marital vs. separate property.
– For tax, estate, and divorce consequences, consult an attorney and tax professional because state law varies and exceptions exist.

Understanding the two systems: common-law property vs. community property

Common-law (equitable distribution) states

– Most U.S. states are common-law property states.
– Property acquired by one spouse is owned by that person unless title is put in both names. If both names are on title, the presumption is joint ownership (often 50/50).
– On divorce, courts divide marital property according to “equitable distribution” — a fair division, which is not necessarily equal. Courts consider factors like income, length of marriage, contributions to the marriage, and future needs.
– On death, how separate property is distributed depends on the deceased’s will or intestacy rules; ownership forms matter (e.g., joint tenancy with right of survivorship will pass automatically to the surviving joint owner).

Community-property states

– The nine full community property states are: Arizona, California, Idaho, Louisiana, Nevada, New Mexico, Texas, Washington, and Wisconsin.
– In community property states, most assets and debts acquired during the marriage are owned equally by both spouses (50/50).
– Earnings, property bought with those earnings, and most debts acquired during the marriage are community property. Separate property typically includes premarital assets and inheritances/gifts to one spouse (unless commingled).
– Alaska and some other jurisdictions offer elective community property systems: Alaska has an “opt-in” community property system (spouses must agree); Tennessee and South Dakota have passed elective community property laws; the Commonwealth of Puerto Rico follows community property rules under its civil code.
– On divorce, community property is generally divided equally, though exceptions can apply (e.g., dissipation/misappropriation of marital assets).

How special categories are treated

– Retirement accounts and pensions: If contributions were made during the marriage from earned income, those contributions (and growth attributable to them) are often treated as marital property. Qualified plans may require a QDRO (qualified domestic relations order) to split benefits.
– IRAs: Although an IRA is an individually titled account, portions attributable to contributions made during marriage usually count as marital property.
– Inheritances and gifts: Normally separate if kept separate. If commingled (e.g., inherited funds deposited into a joint account or used to buy the marital home), the character can convert to marital property.
– Property titles: Ownership form matters (joint tenancy with right of survivorship, tenancy by the entirety, tenancy in common). Some forms transfer automatically on death regardless of a will.
– Property acquired after separation: Usually separate property if a legal separation is in effect and the couple intended to end the marriage (rules vary by state).

Practical steps and checklists

Use these practical steps to protect assets, clarify ownership, and reduce disputes if marriage ends or a spouse dies.

Before marriage (or early in marriage)

1. Consider a prenuptial agreement:
– Define what will be separate vs. marital property.
– Address division of retirement accounts, businesses, and spousal support.
– Ensure the prenup is properly executed with legal advice for both parties to maximize enforceability.
2. Discuss titular ownership:
– Decide whether to put property in one name, both names, or use another arrangement consistent with your goals.
3. Get basic estate planning documents in place:
– Wills, beneficiary designations, powers of attorney, and health care directives.
4. Understand state law:
– Know whether you live in a community property state or a common-law state (or if you can opt-in to community property like Alaska).

During marriage

1. Maintain good records:
– Keep documentation showing source of funds for purchases (useful if a premarital asset or inheritance is at issue).
2. Avoid unnecessary commingling:
– If you want an asset to remain separate (inheritance, premarital savings), keep it in separate accounts and avoid using it for joint purchases.
3. Title property intentionally:
– Put names on deeds, titles, bank accounts in the form that reflects your intent and be aware of the legal consequences.
4. Review and update beneficiaries:
– Ensure life insurance and retirement account beneficiaries reflect current wishes; beneficiary designations often override wills.
5. Track retirement contributions:
– Keep statements and records to help identify marital portions of retirement accounts if needed later.

If separation or potential divorce occurs

1. Know the separation date:
– In community property jurisdictions, the date of separation can determine when community property ends; document dates and intent.
2. Preserve evidence:
– Secure financial records, tax returns, account statements, titles, deeds, and receipts.
3. Consider a temporary court order:
– Courts can issue temporary orders for support, asset preservation, and who lives in the marital home.
4. Get a QDRO for splitting qualified plans:
– For dividing pensions and 401(k) accounts you’ll typically need a QDRO; IRAs may require a specific transfer order or be divided under state procedures.
5. Negotiate (mediation/arbitration) where possible:
– Mediation can be faster and less costly than litigated division.

After a spouse’s death

1. Check titled ownership and beneficiary designations:
– Joint tenancy and tenancy by the entirety usually pass automatically to the survivor.
2. Probate and estate administration:
– Separate property usually passes under the will or intestacy rules; marital property rules still apply. Consult an estate attorney.
3. Update your estate plan:
– Change beneficiaries and estate documents as needed.

When to get professional help

– Estate planning attorney for wills, trusts, and probate issues.
– Family/divorce attorney for separation, divorce, and property division.
– Tax advisor for filing status, community income reporting, and tax consequences of property transfers.
– Financial planner for retirement division and long-term planning.
– Mediator for negotiated settlements to avoid costly litigation.

Common pitfalls to watch for

– Commingling separate funds into joint accounts without documentation.
– Assuming title equals the entire legal story: informal contributions (like non-titled labor in a business) can create claims in some states.
– Relying on verbal agreements; put agreements in writing and get legal advice.
– Forgetting to update beneficiary designations — these control many financial accounts regardless of wills.

Sample checklist for couples

– Decide whether to sign a prenup/postnup and get legal review.
– Review and, if needed, retitle major assets to reflect intentions.
– Keep separate accounts for premarital assets/inheritances you want to remain separate.
– Maintain a file of financial records (tax returns, account statements, deeds).
– Update beneficiaries and estate documents after major life events (marriage, births, divorce, death).
– Consult an attorney before transferring or refinancing major assets during marital stress.

Reminder: state rules differ and facts matter

This overview explains the general principles used across the U.S., but laws and procedural requirements differ by state and by the specific facts of a case. Always consult a qualified family law or estate planning attorney in your state before signing agreements or making decisions you expect to have long-term consequences.