Community Property: Definition, Where and When It Applies

Community property law gives spouses equal ownership of assets acquired while married; it applies in certain U.S. states.
Connor Emmert
By Connor Emmert 
Edited by Claire Tsosie

Many or all of the products featured here are from our partners who compensate us. This influences which products we write about and where and how the product appears on a page. However, this does not influence our evaluations. Our opinions are our own. Here is a list of our partners and here's how we make money.

The investing information provided on this page is for educational purposes only. NerdWallet does not offer advisory or brokerage services, nor does it recommend or advise investors to buy or sell particular stocks, securities or other investments.

Community property is a legal term for assets acquired during a marriage. Under community property law, both spouses have equal ownership of the assets, regardless of who acquired the asset. In community property states, equal ownership applies to financial assets, real estate, personal property, income or even debt.

» Get started: Make a will online

What is not community property?

There are a few cases in which community property laws may not apply, depending on state laws. Common exclusions include:

  • Property that was acquired before a marriage.

  • Property named in a prenuptial agreement.

  • Property that was acquired while living in a state in which community property laws don't apply. Depending on the state, there are some exceptions to this rule — more on that later.

  • Any gifts or inheritance received by either spouse.

Community property states

Nine U.S. states are community property states, meaning they have community property laws in place. 

  • Arizona.

  • California.

  • Idaho.

  • Louisiana.

  • Nevada.

  • New Mexico.

  • Texas.

  • Washington.

  • Wisconsin.

Each state has different rules and regulations for what constitutes community property and how to approach different living arrangements.

  • Some states recognize forms of domestic partnership arrangements under community property law, meaning that you wouldn’t necessarily have to be married for the law to apply.

  • Some states have optional community property trust laws, which allow married couples living in common-law states to convert assets into community property. 

  • In Alaska, Florida, Kentucky, South Dakota and Tennessee, spouses can elect to hold some (or all) assets under community property laws. However, most of these states require married couples to establish a community property trust to do so.

Community property trusts are joint-owned arrangements that assign equal ownership to both spouses. The benefit of setting up a community property trust is that if one spouse dies, the surviving spouse will have a stepped-up cost basis equal to current market value for all assets held in the trust. This means the surviving spouse is allowed to replace the original purchase price with the current market value of an asset, which can help reduce capital gains taxes if they decide to sell any property.

» Get started: Setting up a trust

Trust & Will
Best for: Ease of use. Cost: One-time fee of $159 per individual or $259 for couples. $19 annual membership fee thereafter.

Nolo's Quicken WillMaker
Best for: Users who want an all-inclusive experience. Cost: $99 per year for Starter plan. $139 per year for Plus plan. $209 per year for All Access plan.

Best for: State-specific legal advice. Cost: $89 for Basic will plan. $99 for Comprehensive will plan. $249 for Estate Plan Bundle.

What if I move to a different state?

  • If you move out of a community property state to a common law state, the community property arrangement is terminated.

  • If you move from a common law state to California, Idaho, Washington or Wisconsin, any property you bring with you automatically falls under the community property laws of that state.

  • If you’re moving to Arizona, Louisiana, Nevada, New Mexico or Texas, property ownership won’t automatically change unless you and your spouse elect to do so.

Community property affects estate planning

If you live in a community property state, you typically cannot bequeath more than 50% of any assets you acquired during the course of your marriage to anyone other than your surviving spouse. Additionally, neither spouse can sell or give away community property without the other spouse’s consent.

Retirement accounts funded during a marriage are generally required to list the surviving spouse as the sole beneficiary unless a different arrangement is explicitly agreed to and signed by both spouses.

Divorce terminates community property terms

Most states require a finalized divorce decree to legally terminate the community property estate, even if the spouses no longer live together. Only California and Washington recognize physical separation with the intention of divorcing as grounds for termination of a community property estate.

In common law states, keeping property separate isn't required

  • In common law states, marital property is treated differently as each spouse is entitled to full ownership of assets or property acquired separately from each other.

  • Spouses in common law states can agree to a division of property as they see fit, provided that both parties sign a written agreement.

Get more smart money moves – straight to your inbox
Sign up and we’ll send you Nerdy articles about the money topics that matter most to you along with other ways to help you get more from your money.