Does marriage change property rights?
States have different laws and regulations regarding property rights after marriage. The short answer is that yes—marriage will usually change property rights because spouses automatically have rights to property that they otherwise would not have simply because they are married. Those rights, however, are not straightforward. The critical question at the outset is whether you live in a community property state.
What is a non-community property state?
Most states are non-community property states where they apply the common law approach to property rights. In these states, property division is based on equitable distribution rather than automatically assuming that every piece of property acquired during a marriage is owned jointly by the spouses.
These states look at the title, deed, registration document, or other ownership records. If a single spouse is named on the ownership record, then they are often considered the only owner of that property.
If the property does not have documentation for ownership, then additional steps to show ownership may be required. For instance, if just one spouse paid for it, cared for it, or received the property as a gift, then it is likely theirs alone. If, however, the couple acquired the property with joint funds after marriage or both spouses act as joint owners, it is more likely to be considered marital property.
As a sole owner, you can leave the property to whoever you choose when it comes to estate planning. You can also generally take any other steps you would like to dispose of or transfer the property without consulting with your spouse.
What is the difference between joint property and joint tenancy?
In non-community property states, both spouses may own joint property, also known as marital property. Both names may appear on the title or deed. In general, joint owners possess a half-interest in the property.
There are, however, situations where both owners can own the whole property and the ownership interest is not divisible. This concept is commonly referred to as joint tenancy.
You can give away your half interest in the property, but selling or transferring a half interest can be difficult. There may not be a willing buyer who wants to share ownership of the property with someone else.
What is a community property state?
Community property states treat property differently compared to common law or non-community property states. They assume that all property acquired during the marriage is joint or community property of the couple.
Earnings and the property acquired with those earnings are community property. Of course, debts are shared as well.
Here are the handful of community property states:
- New Mexico.
Alaska allows residents to opt in to community property laws, but they are not required. South Dakota and Tennessee also have optional community property laws.
When one spouse dies in a community property state, the other spouse automatically acquires all rights to the community property. In some cases, estate planning can alter this automatic inheritance.
Is there separate property in community property states?
Some property is considered separate even in a community property law state. If you owned the property individually before marriage, the property remains separate. Separate property also includes gifts and inheritances received individually, regardless of whether it came before or after the marriage.
Still, separate property can become community property if there is an intent to waive individual ownership. For instance, the gift or inheritance could be sold and the proceeds are deposited in a joint account. A Prenuptial Agreement may set out which property remains separate and which is a marital asset.
When does separate property become marital property?
There are generally two types of property in a marriage, whether you live in a community property or a non-community property state. They are marital property and separate property.
Marital property is generally any property that the couple jointly acquires. In community property states, virtually every item of personal property or real estate is considered marital property. In common law states, the property’s acquisition may determine whether it is marital property.
Most property acquired after the marriage begins will be considered marital property. If the property is titled separately, maintained separately, or otherwise kept separate, it might qualify as separate property in some limited circumstances.
For example, income or retirement accounts accrued during the marriage are considered marital property. Many bank accounts, Social Security, health insurance benefits, and other assets are also considered marital property. In most circumstances, debts (including credit cards and personal loans) acquired during the marriage are also martial property with both spouses responsible for their obligations.
Separate property usually includes property brought into the marriage and maintained separate and apart from a spouse. It also includes individual gifts and inheritance.
Separate property can be acquired after the couple has officially separated, divorced, or after a spouse’s death.
Does separate property turn into marital property?
Generally, property brought into the marriage and shared with the other spouse becomes marital property. In fact, unless you deliberately keep the property away from the other spouse or decline to retitle or change names on real property, the separate property may become marital property.
If you mix separate property with marital property or use the separate property for the benefit of the household or marital home, then it may be considered marital property. In some states, however, spouses must agree in writing to waive their separate property rights for it to become marital property.
Why does the distinction between separate property and marital property matter?
Whether something is considered marital property or separate property will matter in the event of a legal separation or divorce. The family court must divide assets between spouses as part of a divorce, but each spouse’s separate property is not included in the equitable division of property that you might find on a Divorce Worksheet. Instead, only marital property is divided.
In many situations, a couple can prepare a Joint Financial Statement to set out who owns what and determine whether there is any dispute over property. This information can also affect child support and spousal support in some cases.
Whether real or personal property is marital property also has an impact on estate planning and inheritances. In many situations, a jointly owned property automatically passes to the surviving spouse in the event of the other spouse’s death (unless there is a Will or another estate planning document that says otherwise). Separate property, however, may pass to other heirs.
How can I protect a business started either before or after getting married?
If you want to keep a business separate from marital property, you may need to exclude your spouse from the company. This can be difficult because business assets might also support the household. In addition, it depends on whether you live in a community property state and whether the business was started before or after your marriage.
Businesses brought into the marriage
A business brought into the marriage may be a separate asset in either a common law or community property state. Once the spouse earns money in that business, however, and contributes to the household, that income becomes marital property.
The business can become joint property if either spouse contributes to the company in any way. In some cases, only a share of the business may become joint property, but dividing a business can be difficult.
To keep a business from becoming marital property, you may want to consider a Prenuptial Agreement. You may take steps to keep funds and assets related to the business away from joint accounts or other joint assets to avoid comingling funds and assets. Forming a separate legal entity, like a corporation or LLC can also help make sure a divorce does not end the business.
Starting a business after marriage
If you start the business after marriage, options are limited to keep the business separate if you live in a community property state. Even in common law states, however, a written agreement that states the business is separate may not hold up in court if the spouse was involved in any way.
A spouse might have a claim to a share even if they do not have a claim for the whole company. These parts might include:
- Certain assets or property.
- Contributions to the company before the divorce.
Even if a spouse has some rights to the property or business value, they cannot take control unless you fail to protect the business. Forming a corporation or limited liability company (LLC) can be an effective method to protect a business before a divorce.
Who owns what when married couples acquire property together?
If a married couple acquires property together, they will generally have equal rights to the property. They also earn an equal share of the profits when the property is sold. Both spouses can sell or otherwise transfer their individual half interest.
How can my spouse and I avoid disputes over property?
You may have to decide if you want to combine property in your marriage or keep certain assets separate. One way to set out your joint wishes is to make a Prenuptial Agreement stating which properties will be combined and which will not. It may sound unromantic, but a Prenuptial Agreement can help remove doubts or confusion later in the marriage.
If you are already married, a Postnuptial Agreement can accomplish the same goal. These agreements can help avoid disputes in the future.
If you have more questions about marital property either before or after your marriage, reach out to a Rocket Lawyer network attorney for affordable legal advice.
This article contains general legal information and does not contain legal advice. Rocket Lawyer is not a law firm or a substitute for an attorney or law firm. The law is complex and changes often. For legal advice, please ask a lawyer.