Marriage & Property Ownership: Who Owns What?

Married couples usually own most, if not all, of their valuable property together. If you want to leave everything to your spouse, as many people do, you don't need to worry about what belongs to you and what belongs to your spouse. If you'd rather divide your property among several beneficiaries, you'll need to know just what's yours to leave. 

Married couples usually own most, if not all, of their valuable property together. If you want to leave everything to your spouse, as many people do, you don't need to worry about what belongs to you and what belongs to your spouse. If you'd rather divide your property among several beneficiaries, you'll need to know just what's yours to leave.

Common Law States

Most states, except those listed as community property states, below, use the "common law" system of property ownership. In these states, it's usually easy to tell which spouse owns what. If only your name is on the deed, registration document, or other title paper, it's yours. You are free to leave your property to whomever you choose, subject to your spouse's right to claim a certain share after your death. (For more information, see Inheritance Rights.)

If you and your spouse both have your name on the title, you each own a half-interest in the property. Your freedom to give away or leave that half-interest depends on how you and your spouse share ownership. If you own the property in "joint tenancy with right of survivorship" or "tenancy by the entirety," the property automatically belongs to the surviving spouse when one spouse dies -- no matter what the deceased spouse's will says. But if you instead own the property in "tenancy in common" (less likely), then you can leave your half-interest to someone other than your spouse if you wish.

If an item doesn't have a title document, generally you own it if you paid for it or received it as a gift.

Community Property States

If you live in a community property state, the rules are more complicated. Community property states are Arizona, California, Idaho, Louisiana, Nevada, New Mexico, Texas, Washington, and Wisconsin. (In Alaska, spouses can sign an agreement making specific assets community property.)

Generally, in community property states, money earned by either spouse during marriage and all property bought with those earnings are considered community property that is owned equally by husband and wife. Likewise, debts incurred during marriage are generally debts of the couple. At the death of one spouse, his half of the community property goes to the surviving spouse unless he left a will that directs otherwise.

Married people can still own separate property. For example, property inherited by just one spouse belongs to that spouse alone. A spouse can leave separate property to anyone; it doesn't have to go to the surviving spouse.

Community Property	Separate Property
Money either spouse earns during marriage	Property owned by one spouse before marriage
Things bought with money either spouse earns during marriage	Property given to just one spouse
Separate property that has become so mixed with community property that it can't be identified	Property inherited by just one spouse

These rules apply no matter whose name is on the title document to a particular piece of property. For example, a married woman in a community property state may own a car in only her name -- but legally, her husband may own a half-interest. Here are some other examples:

Property	Classification	Why
A computer your spouse inherited during marriage	Your spouse's separate property	Property inherited by one spouse alone is separate property
A car you owned before marriage	Your separate property	Property owned by one spouse before marriage is separate property
A boat, owned and registered in your name, which you bought during your marriage with your income	Community property	It was bought with community property income (income earned during the marriage)
A family home, which the deed states that you and your wife own as "husband and wife" and which was bought with your earnings	Community property	It was bought with community property income (income earned during the marriage) and is owned as "husband and wife"
A camera you received as a gift	Your separate property	Gifts made to one spouse are that spouse's separate property
A checking account owned by you and your spouse, into which you put a $5,000 inheritance 20 years ago	Community property	The $5,000 (which was your separate property) has become so mixed with community property funds that it has become community property

Changing the rules with a written agreement. Married couples don't have to accept the rules about what is community property and what isn't. They can sign a written agreement that makes some or all community property the separate property of one spouse, or vice versa.

Some community property can avoid probate. Several community property states offer an advantageous way of holding title to community property that avoids probate at the death of the first spouse. It's called "community property with right of survivorship." If a couple holds title to property -- a house, for example -- in this way, when one spouse dies the property will automatically belong to the survivor, without any probate court proceedings.

Inheritance Rights

Some very close relatives -- a surviving spouse and sometimes children or grandchildren -- have the right to claim an inheritance, and in some cases this can override what it says in your will. Here's how it works:

A Spouse's Right to Inherit

In most circumstances, a surviving spouse cannot be completely cut out of a will.

Community property states

The community property states (Arizona, California, Idaho, Louisiana, Nevada, New Mexico, Texas, Washington,Wisconsin, and Alaska -- if spouses sign an agreement creating community property) have their own rules about what spouses own and can claim. Basically, each spouse automatically owns half of what either one earned during the marriage, unless they have a written agreement to the contrary. Each spouse can do whatever he or she likes with his or her own half-share of the community property and with his or her separate property. 

Other states

In all other states, there is no rule that property acquired during marriage is owned by both spouses. But to protect spouses from being disinherited, most of these states give a surviving spouse the right to claim one-third to one-half of the deceased spouse's estate, no matter what the will provides. In some states, the amount the surviving spouse can claim depends on how long the couple was married.

These provisions kick in only if the survivor goes to court and claims the share allowed by law. If a surviving spouse doesn't object to receiving less, the will is honored as written.

Example:

Johanna's will leaves $80,000 to her fourth husband, Fred, and divides the rest of her property, totaling almost $500,000, among her three sons from previous marriages. If Fred is happy with his inheritance, everything will go according to Johanna's plan. But if Fred wants more, he can claim a share of Johanna's estate -- and get substantially more than $80,000. If he does, Johanna's three sons will take what's left.

If you don't plan to leave at least half of your property to your spouse in your will, and have not provided for him or her generously outside your will, you should consult a lawyer unless your spouse willingly consents, in writing, to your plan.

Ex-Spouses' Rights

In most states, getting divorced automatically revokes gifts made to a former spouse in your will. But to be on the safe side, if you get divorced, make a new will that revokes the old one. Then you can simply leave your former spouse out of your new will.

Children's Right to Inherit

Generally, children have no right to inherit anything from their parents. In certain limited circumstances, however, children may be entitled to claim a share of a deceased parent's property. For example, the Florida constitution prohibits the head of a family from leaving his or her residence to anyone other than a spouse or minor child if either is alive.

Most states do have laws to protect against accidental disinheritance. These laws usually kick in if a child is born after the parent made a will that leaves property to siblings, and the parent never revises the will to include that child. The law presumes that the parent didn't intend to freeze out the newest child, but just didn't get around to revising the will. In that situation, the overlooked child may have a right to a significant part of the parent's assets.

In some states, these laws apply not only to children, but also to any grandchildren of a child who has died.

If you decide to disinherit a child, or the child of a deceased child, your will should clearly state your intention. And if you have a new child after you've made your will, remember to make a new will.

What A Will Can't Do

Wills are wonderful, simple, inexpensive ways to address many people's estate planning needs, but they can't do it all. Here are some things you shouldn't expect to accomplish in your will.

Leave Certain Kinds of Property

You can't use your will to leave:

• Property you hold in joint tenancy with someone else (or in "tenancy by the entirety" or "community property with right of survivorship " with your spouse). At your death, your share will automatically belong to the surviving co-owner. A will provision leaving your share would have no effect unless all co-owners died simultaneously.
• Property you've transferred to a living trust.
• Proceeds of a life insurance policy for which you've named a beneficiary.
• Money in a pension plan, individual retirement account (IRA), 401(k) plan, or other retirement plan for which you've named a beneficiary on forms provided by the account administrator.
• Stocks or bonds held in beneficiary (transfer-on-death or TOD) form. If you want to change the beneficiary, contact the brokerage company.
• Money in a payable-on-death bank account. If you want to name a different beneficiary, just fill out a simple form at the bank.

Leave Funeral Instructions

Wills are typically not read -- or even found -- until days or weeks after a death. That's too late to be of help to the people who must make immediate decisions about the disposition of a body and funeral or memorial services. Instead, make a separate document spelling out your wishes and tell your executor where to find it when the time comes. (See Final Arrangements FAQ.)

Reduce Estate Taxes

If you expect your estate to owe federal estate taxes, you may want to take steps now to reduce the tax liability. A will won't help you avoid taxes. Many kinds of trusts can reduce or postpone the tax bill. 

Avoid Probate

Property left through a will usually must spend several months or a year tied up in probate court before it can be distributed to the people who inherit it. 

Put Certain Conditions on Gifts

There are also a few legal limitations on what you can do in a will. For example, you cannot leave a gift that is contingent on the marriage, divorce, or change of religion of a recipient. You can, however, try to influence lesser matters. For example, you could leave money "to Jeremy, if and when he goes to college." Making such conditional gifts, however, usually opens a can of worms -- who will enforce the will's conditions, and for how long?

Leave Money for an Illegal Purpose

This one doesn't come up often, but you can't earmark money for something illegal, such as encouraging minors to smoke.

Arrange to Care for a Beneficiary With Special Needs

If you want to provide long-term care for someone, a will isn't the place. Far better to set up a trust that's tailored to the beneficiary's needs. A special needs trust can provide extra income for a loved one with disabilities, without jeopardizing government benefits.

Nolo's book Special Needs Trusts, by Stephen Elias, explains how special needs trusts work and gives you the tools to make one yourself. Of course, if you have a complicated situation or if you would rather have an expert's advice about your specific situation, you may also want to see a lawyer who's an expert in this field.

Leave Money to Pets

Pets can't own property, so don't try to leave property directly to your pets in your will. Instead, leave your pet to someone who has agreed to provide a good home -- and leave that person some money to help out with pet-related expenses. Some states allow you to set up trusts for animals, but that's probably not necessary if you have confidence in the person you've named to care for your pets after your death.