Marital property is the legal term for a married couple’s property acquired during the marriage. In some states, this property is considered “community property” — meaning that all income and property gained after a couple marries is owned jointly and equally by both spouses.
Similarly, in community property states, community debt or marital debt is debt that is the equal responsibility of both parties in a marriage. Business debt incurred during a marriage is an example of community debt.
Most property acquired prior to the marriage — as well as inheritance, gifts, or payouts from personal injury cases — is typically considered separate property.
Understanding your state’s laws will help you determine what is and isn’t community property. Community property is not recognized in all jurisdictions. Here are the nine community property states:
In addition, Alaska, Tennessee, and South Dakota have optional community property systems in place for couples who choose to hold marital property. States that are not community property states are called common law or equitable distribution states. In these states, the division of marital property and marital debt is determined by the couple or a judge.
In community property states, all income, property, and debt obtained in those states during a marriage is considered community property. In other words, those things are shared equally by both parties in a relationship.
Following a divorce, property distribution will be determined by the laws of the state where the divorce takes place. For example, if you get married and take out a student loan in Nevada — a community property state — but are living in New York — an equitable distribution state — at the time of your divorce, New York’s equitable distribution laws would apply. In other words, the student loans from Nevada would not be considered community debt.
If a married couple moves from a community property state to a common law state, in the event of a divorce, a judge will determine the distribution of property and debt based on the state’s laws.
Related: Student Loan Forgiveness & Divorce