Community Property vs Common-Law States: Inheritance Rules

In a community property vs common law state inheritance comparison, the core difference is how marital assets are split at death: community-property states divide most marital property equally between spouses, while common-law states let each spouse own property individually, and only what passes to the surviving spouse depends on the will, trust, or probate rules.

The Nine Community-Property States

Community property is a legal concept embedded in the statutes of Arizona, California, Idaho, Louisiana, Nevada, New Mexico, Texas, Washington, and Wisconsin. Each treats income, assets, and property acquired during marriage as owned equally by both spouses, regardless of whose name is on the title or who earned the income. At death, the decedent spouse’s half of the community property passes to heirs according to the will or intestacy law; the surviving spouse already owns the other half outright. This system simplifies some estate planning decisions but constrains how much control a decedent has over shared assets.

Louisiana’s system historically draws from French civil law and is the oldest community-property framework in the United States. The other eight adopted community property as part of western state territorial law and have retained or refined it. Idaho, Texas, Wisconsin, and Washington each have slightly different rules about whether certain assets (pensions, business interests) count as separate or community property, which matters enormously for estate administration.

How Common-Law States Work

Common-law states, which comprise the vast majority, operate on the principle of sole and separate property ownership. A spouse has full legal title to whatever they own individually—earned income, inherited gifts, real estate held in their name alone, investments, business interests. The other spouse has no automatic claim on community-law property except what the deceased spouse explicitly directs in their will, trust, or what intestacy law awards if there is no will.

A surviving spouse in a common-law state typically receives a statutory share of the probate estate (often one-third or one-half, depending on the state and whether there are children), plus any non-probate transfers like life insurance, bank accounts on deposit, or property in joint tenancy or living trusts. Without a will or trust arrangement, the surviving spouse’s share is fixed by state law, and much property can end up in probate, adding time and cost.

Separate Property in Both Systems

Both community-property and common-law states recognize separate property: assets owned before marriage, inherited property, or gifts explicitly designated as separate. In community-property states, any property earned or acquired during marriage is presumed to be community property unless proven otherwise. In common-law states, property is separate unless placed in joint ownership or a trust. The burden of proof differs, which has real consequences if an estate is contested.

A key planning implication: if you marry in or move to a community-property state, property you owned as separate before the marriage generally stays separate, even if you later move to a common-law state. State courts disagree on the precise rules, so documentation matters for people who migrate between states.

Intestacy and the Surviving Spouse

When someone dies without a will (intestate) in a community-property state, the surviving spouse’s share of the community property is often generous—sometimes all of it. But the decedent’s separate property and the decedent’s half of the community property pass according to the state’s intestacy statute, typically to the spouse and children, with complex formulas if the spouse wants to renounce their share.

In a common-law state without a will, the surviving spouse and children divide the entire probate estate in a fixed ratio set by statute—often 50-50, or 33-66, depending on the number of children and the state. Nothing is “automatically” the spouse’s the way community property would be; the probate court must distribute assets per statute.

Estate Planning Differences

Community-property residents have less flexibility in their wills. If a spouse dies in California, they cannot simply will all community property to someone other than their spouse (or their children, in some interpretations), because the surviving spouse already owns half of it outright. Planning often involves trusts and careful titling to preserve control while respecting the spouse’s existing ownership.

Common-law estate planning is more testamentary. A person can dispose of assets freely by will (subject to the surviving spouse’s elective share—usually one-third—in some states) and can use trusts to direct property to children, grandchildren, or charity. The downside is that without deliberate planning (trusts, joint ownership, or beneficiary designations), much property ends up in probate, which is public, slow, and costly.

State-of-Death Law Controls

If you own real estate in multiple states or move after acquiring property, the state where the property is located generally governs how it is inherited. Your will can be valid in multiple states (per the Uniform Probate Code principles adopted by many states), but marital property rights depend on where the property sits. A person might be married in one community-property state, move to a common-law state, and end up with a complex mix of community and separate property, requiring sophisticated planning.

Practical Tax and Planning Implications

Community-property states offer a full step-up in basis at death for both the deceased spouse’s share and the surviving spouse’s share of community property, which can save substantial capital gains taxes if a business or real estate appreciated. Common-law states give the step-up only to the deceased spouse’s share (unless property is jointly owned), so the surviving spouse’s separately owned assets carry the original cost basis until their death—a potential tax disadvantage.

This tax difference alone justifies careful planning if you live in a community-property state. Couples should document which assets are separate and which are community, because the tax treatment depends on it.

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