Common Law Property
What Is Common Law Property?
Common law property is a system that most states use to decide ownership of property acquired during marriage. Rather than the community property system, which treats assets acquired during a marriage as having a place with the two partners, the common law property system states that property that one member of a married couple gains has a place exclusively with that person except if the property is explicitly put in the names of the two spouses. This topic becomes important in wealth management and estate management following a divorce or death of a spouse.
Figuring out Common Law Property
To act as an illustration of how a common law property system functions, on the off chance that one partner purchases a boat, vehicle, or other vehicle and puts just their name on the title, then that vehicle has a place solely with that person. In the event that this partner lived in a state that recognized community property, in any case, the vehicle would naturally turn into the property of the two partners in the marriage.
Just nine states perceive community property. They are:
- Arizona
- California
- Idaho
- Louisiana
- Nevada
- New Mexico
- Texas
- Washington
- Wisconsin
Three different states — Alaska, South Dakota and Tennessee — are "pick in" states for community property. Whether a state has a common law or community property system, the division of assets in a divorce likewise still up in the air by a prenuptial agreement or a postnuptial agreement in the event that the separating several has one.
The qualification between common law and community property law is important in instances of divorce as well as in continuous wealth management. For high-net-worth individuals in particular, a wealth manager could take great measures to decide the legitimate ownership of certain assets, in one or the other common or community property circumstances. Wealth managers likewise might be associated with the creation of wills and trusts and directing the death of wealth starting with one generation then onto the next, which may all be impacted by whether the assets being referred to are represented by common or community property law.
Common law property rules can apply not exclusively to substantial assets, like cars, real estate, and fine art, yet in addition to theoretical assets, like licenses and brand names.
Notwithstanding the case of vehicles, other physical assets that could be partitioned in view of common law property rules incorporate real estate (like first and second homes, rental properties, land, and construction not utilized for everyday residing, like harbors and boathouses). Likewise on the rundown are resources like art, collectibles, and collectibles.
Physical assets are just a single type of wealth, of course. There are likewise intangible assets, which incorporate such things as brand names, licenses, brand names, leases, computer programs, customer records, franchise agreements, etc. Immaterial assets additionally are subject to common law or community property rules, despite the fact that they will generally be associated more with companies and less with people.
Highlights
- Under a common law property system, assets acquired by one member of a married couple are considered to have a place with that person, except if they were put in the names of both.
- Common law property stands out from a community property system, which treats assets acquired during a marriage as having a place with the two partners.
- Common law property is a system that most states use to decide the ownership of property, particularly in instances of divorce.
