Common Law Property: Ownership, Implications, and Asset Management


Common law property is a system that determines property ownership, particularly in cases of divorce. This article provides a comprehensive exploration of common law property, its differences from community property, and its impact on wealth and estate management. It discusses the nuances of tangible and intangible asset ownership and delves into the complexities faced in community property states. You’ll gain a thorough understanding of this essential aspect of personal finance.

Common law property: understanding ownership and implications

Common law property is a legal framework used by the majority of states in the United States to determine ownership of assets acquired during marriage. This system stands in contrast to community property, where assets acquired during marriage are presumed to belong to both partners. Under common law property, assets acquired by one spouse are considered the sole property of that individual unless explicitly titled jointly. This article delves deep into common law property, its differences from community property, its implications for wealth and estate management, and much more.

The fundamentals of common law property

Common law property operates on a straightforward principle: assets acquired by one spouse belong to that individual unless they are jointly titled. To illustrate how this system works, consider the scenario where one spouse purchases a significant asset like a car or a house and registers it solely in their name. In common law property states, that asset is legally considered the exclusive property of the purchasing spouse.

However, it’s crucial to note that not all states follow common law property rules. Only nine states in the U.S. explicitly recognize community property, where assets acquired during marriage are automatically regarded as shared property. These states are:

  • Arizona
  • California
  • Idaho
  • Louisiana
  • Nevada
  • New Mexico
  • Texas
  • Washington
  • Wisconsin

Three additional states—Alaska, South Dakota, and Tennessee—are “opt-in” states for community property. In such states, couples may choose to adopt community property laws to govern the division of assets in case of divorce.

The marital property regime, whether common law or community property, has a significant impact on asset division during divorce. It’s not solely the legal framework that determines ownership but also prenuptial or postnuptial agreements, if present, which can outline how assets will be divided in case the marriage ends.

Common law property and wealth management

The distinction between common law property and community property is not only relevant in divorce proceedings but also plays a vital role in ongoing wealth management and estate planning. For individuals with substantial assets, wealth managers often find themselves navigating the complexities of property ownership.

Wealth managers ensure the rightful ownership of assets and help individuals make informed decisions regarding their financial futures. They might be involved in tasks such as:

  • Determining ownership: Wealth managers meticulously assess the ownership of assets and provide clarity on whether they are individually or jointly owned. This can be crucial in making decisions about these assets, such as selling, bequeathing, or transferring them.
  • Estate planning: Estate planning is heavily influenced by the type of property laws in place. Wealth managers assist in creating wills and trusts, helping individuals pass on their wealth to future generations efficiently and in accordance with the law.
  • Asset protection: Protecting individual assets, especially in common law property states, is essential. Wealth managers develop strategies to safeguard assets acquired by one spouse from potential claims by the other spouse.

The scope of common law property

Common law property rules apply not only to tangible assets, such as homes, vehicles, and fine art, but also to intangible assets, including intellectual property, patents, and trademarks. Let’s explore the diverse scope of common law property:

Tangible assets

Real estate: Common law property rules extend to various types of real estate, including primary and secondary homes, rental properties, land, and non-residential structures like docks and boathouses. In common law states, ownership of these properties is determined by individual acquisition unless jointly titled.

Valuables: Tangible assets like art, antiques, and collectibles fall under the purview of common law property regulations. This means that ownership is typically attributed to the spouse who acquired these items, especially if there is no joint title.

Vehicles: Cars, boats, and other vehicles are subject to common law property rules. If one spouse purchases a vehicle and registers it solely in their name, it is considered their exclusive property.

Intangible assets

Intellectual property: Common law property principles also extend to intangible assets, such as patents, trademarks, and intellectual property rights. These assets, often associated with businesses, may be subject to common law property laws.

Business assets: For business owners, common law property can impact the ownership of business assets, including stocks, shares, and business-related intellectual property.


Here is a list of the benefits and drawbacks to consider.

  • Clarity of ownership: Common law property rules provide clear guidelines on asset ownership.
  • Flexibility: Assets can be owned individually, allowing for more autonomy in financial decisions.
  • Protection of separate property: In cases of divorce, assets acquired individually are less likely to be divided, protecting the financial interests of each spouse.
  • Complexity in community property states: Understanding and navigating property laws can be more complicated in community property states, leading to potential legal challenges.
  • Potential for disputes: Disagreements over asset ownership may arise, resulting in legal conflicts, which can be emotionally and financially draining.
  • Estate planning challenges: The distinction between separate and shared property can affect estate planning strategies, potentially complicating the process of passing on assets to heirs.

Frequently asked questions

How does common law property affect asset division during divorce?

Common law property allows assets acquired by one spouse to be considered their individual property unless jointly titled. This can impact asset division during divorce, with individually acquired assets often remaining with the acquiring spouse.

What are “opt-in” community property states?

“Opt-in” community property states, including Alaska, South Dakota, and Tennessee, allow couples to choose community property laws to govern the division of assets during divorce. This choice can affect the distribution of assets.

Can common law property apply to business assets?

Yes, common law property principles extend to business assets, including business-related intellectual property and shares. The ownership of these assets can be influenced by the property system in place.

How can wealth managers assist in common law property states?

Wealth managers play a crucial role in determining asset ownership and helping with estate planning in common law property states. They provide clarity on asset ownership, protect individual assets, and ensure that wealth is passed on according to an individual’s wishes.

Are there any federal laws that override common law property at the state level?

Federal laws generally do not govern common law property; it is primarily a matter of state law. However, specific federal laws may influence property division in certain situations, such as bankruptcy cases.

Key takeaways

  • Common law property determines asset ownership in the majority of U.S. states.
  • Under common law property, assets acquired by one spouse belong to that individual unless jointly titled.
  • Community property is an alternative regime followed in nine U.S. states, where assets acquired during marriage are considered shared property.
  • Wealth managers play a critical role in navigating the complexities of property ownership and estate planning in common law property states.
  • Common law property rules apply to both tangible and intangible assets, impacting various aspects of personal finance.
View article sources
  1. marital property – Legal Information Institute
  2. Community Property – United States Department of Veterans Affairs
  3. 25.18.1 Basic Principles of Community Property Law – Internal Revenue Service
  4. How Does Separate Property Become Marital Property? – SuperMoney
  5. Can My Husband Refinance The House Without Me? – SuperMoney