Anaya Nolan
While there is no best way to split finances, it is important to consider the context of each partner's financial situation and expectations. Some couples may opt for a joint account, while others may prefer to keep their finances separate. In the case of common-law marriages, which are recognized in a small number of states, partners may own property jointly or separately. During a separation, property division and debt distribution will depend on the laws of the state in which the couple resides. To avoid conflicts, couples should maintain open communication about their expenses and income and create a financial plan that aligns with their shared goals and expectations.
| Characteristics | Values |
|---|---|
| States that recognize common-law marriage | Arizona, California, Idaho, Louisiana, Nevada, New Mexico, Texas, Washington, Wisconsin, Colorado, Iowa, Kansas, Montana, New Hampshire, South Carolina, Utah, Alabama, Florida, Georgia, Indiana, Ohio, Pennsylvania, Oklahoma, Rhode Island |
| Conditions for common-law marriage | File taxes jointly, have joint bank accounts, represent themselves as a married couple |
| Division of property | In states that recognize common-law marriage, property is divided the same way as for formally married couples. In other states, separate property is owned by one spouse, while marital property is divided fairly, but not necessarily equally. |
| Division of debt | In common-law states, a judge has more discretion. In equitable division states, debt incurred together is divided based on the couple's finances, while separate debt is the responsibility of the individual spouse. In community property states, debt incurred during the marriage, including medical debt, is split equally. |
| Division of expenses | Couples can split expenses 50-50, or proportionately based on income. Some couples prefer to maintain separate finances, while others opt for a joint account. |
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What You'll Learn
Common-law marriage recognition by state
In the United States, common-law marriage, also known as sui juris marriage, informal marriage, or marriage by habit and repute, is a form of irregular marriage that survives only in a handful of states and the District of Columbia, along with some provisions of military law. The recognition of common-law marriage varies across states, and the criteria for recognition differ by jurisdiction.
States Recognizing Common-Law Marriage
As of 2022, common-law marriages are recognized in Colorado, Iowa, Kansas, Montana, Rhode Island, Oklahoma, Texas, and the District of Columbia. These states generally require cohabitation, mutual agreement to be married, and public representation as a married couple.
States with Limited Recognition
Utah, South Carolina, New Hampshire, and Alabama recognize common-law marriages established before a certain date or for specific purposes. Utah's recognition is ambiguous, with government websites claiming it does not exist in the state, while legal websites suggest that "non-matrimonial relationships" may be recognized as marriages under certain conditions.
States Without Recognition
California, for example, does not recognize common-law marriages contracted within the state but will acknowledge those validly formed in other jurisdictions.
Financial Implications of Common-Law Marriage
Common-law marriages are entitled to similar financial benefits as traditional marriages, including tax advantages and simplified expense management. However, the lack of formal documentation can lead to ambiguity regarding marital status, potentially causing legal disputes. Couples in a common-law marriage should consult legal professionals and maintain comprehensive documentation to safeguard their rights, especially when crossing state lines.
Regarding the division of finances, there is no one-size-fits-all approach. Couples may choose to maintain separate finances, have a joint account, or adopt a proportional contribution method based on their incomes. The key is transparent communication, mutual trust, and shared commitment to financial goals.
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Jointly-owned property
In the context of common-law marriage, jointly-owned property refers to any property that is legally held in the name of both spouses or partners. This type of ownership arrangement provides both individuals with equal rights to the property and is often pursued to safeguard finances and avoid heavy taxes.
To establish joint ownership, spouses or partners typically place their individually or jointly-owned assets into a living trust, becoming both grantors and trustees. This allows them to jointly manage and benefit from the property during their lifetimes. However, it's important to note that dissolving this arrangement if one party changes their mind can be complicated and financially challenging.
In the case of separation or divorce, the division of jointly-owned property can be complex. If the couple resides in a state that recognizes common-law marriage, they must pursue a standard divorce, and property is divided in the same way as it would be for formally married couples. This often involves hiring divorce attorneys and, if necessary, allowing a court to decide on property division.
It's worth noting that there are different types of joint ownership, such as joint tenancy and tenancy in common. In joint tenancy, when one spouse or partner dies, the property automatically belongs to the surviving individual. On the other hand, tenancy in common allows each spouse or partner to leave their share of the property to someone other than their spouse or partner if they choose to do so.
The laws and implications of jointly-owned property can vary by state, so it's always advisable to consult with a legal professional before entering into any ownership arrangement to fully understand the rights, interests, and potential complexities that may arise.
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Separate property
In the US, only a small number of states recognize common-law marriage, which offers many of the same benefits as marriage without the traditional license and ceremony requirements. These include Colorado, Iowa, Kansas, Montana, New Hampshire, South Carolina, Texas, and Utah. Six other states recognize common-law marriages established before a specific date, and two states—Oklahoma and Rhode Island—uphold common-law marriages through case law. In states that recognize common-law marriage, property is divided in the same way as it would be for formally married couples.
When it comes to married couples, there are two types of property: marital and separate. Marital property refers to property that a couple acquires during their marriage, including real estate, other property, bank accounts, pensions, securities, and retirement accounts. Separate property, on the other hand, belongs to only one spouse. While the rules vary by state, separate property typically includes:
- Property owned by either spouse before the marriage or after a legal separation.
- Property acquired during the marriage in one spouse's name and not used for the other spouse's benefit.
- Property that both spouses agree in writing is separate, usually through a prenuptial or postnuptial agreement.
- Gifts or inheritances received by one spouse during the marriage.
- The portion of certain personal injury awards meant to compensate for the injured spouse's pain and suffering, rather than reimbursement for financial losses during the marriage.
It is important to note that a separately owned house can become partially marital if marital earnings are used to pay the mortgage or improve the property. Similarly, inherited property may shift in classification if the inheriting spouse allows the couple to live there and uses marital money for the property's expenses. In such cases, the spouse claiming an asset as separate must be able to trace the funds to prove how much is still separate. Business holdings can also be complicated to assess, as any increase in value attributable to the efforts of both spouses may be considered marital property.
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Division of assets and earnings
In a common-law marriage, partners may own property jointly and separately, just like in a formal marriage. However, the laws that govern divorce typically do not apply to unmarried couples unless they live in a state that recognizes common-law marriage. In these states, property division upon separation follows the same process as in a formal marriage.
There are nine community property states: Arizona, California, Idaho, Louisiana, Nevada, New Mexico, Texas, Washington, and Wisconsin. In these states, debt incurred during the marriage is typically divided equally between the couple. This includes credit card debt, medical debt, and mortgage debt. In other states, a judge may have more discretion in deciding how debt is divided, with the principle of fairness and ability to pay taking precedence over equal division.
Couples in a common-law marriage should be aware of the specific laws in their state regarding property and debt division upon separation. For example, some states recognize common-law marriages established before a specific date, while others uphold them through case law.
When it comes to splitting expenses and managing finances within a common-law marriage, there is no one-size-fits-all approach. Some couples choose to maintain separate finances, while others opt for a joint account into which they contribute proportionally based on their incomes. This approach ensures that each partner contributes fairly to shared expenses while maintaining their financial independence.
Open communication about finances, expenses, and income is crucial for couples in a common-law marriage. By understanding each other's financial contexts and goals, they can create a plan that works for their unique situation and helps avoid conflicts about money, which is often cited as a leading cause of relationship issues and divorce.
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Division of debt
In the case of a common-law marriage, the laws that govern divorce do not usually apply to unmarried couples, unless the couple lives in a state that recognizes common-law marriage. In such cases, the property and debt division would be the same as for a formally married couple.
There are nine community property states: Arizona, California, Idaho, Louisiana, Nevada, New Mexico, Texas, Washington, and Wisconsin. In these states, debts incurred during the marriage are considered community debt, and the total debt is typically divided equally between the divorcing spouses. However, if the value of the community debt exceeds the value of the community property, the judge may have the discretion to assign more debt to the spouse with a higher income or greater financial ability.
In the remaining states, which follow the equitable distribution system, the court aims for a fair division of assets and debts, which may not necessarily result in an equal split. Debts incurred separately are generally the responsibility of the spouse who incurred them, while debts in both spouses' names, such as joint credit card debt, are typically shared.
It is important to note that each state has its own laws regarding divorce and debt. In general, debts incurred prior to the marriage or after separation are considered separate debts and are not subject to division during divorce. On the other hand, debts accumulated during the marriage are usually considered marital or community debt and are divided accordingly.
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Frequently asked questions
A common-law marriage is a marriage that has many of the same benefits as a traditional marriage without the license and ceremony requirements. Conditions for common-law marriage generally include partners filing their taxes jointly, having joint bank accounts, and presenting themselves as a married couple. Common-law marriages are recognized in the following states: Colorado, Iowa, Kansas, Montana, New Hampshire, South Carolina, Texas, and Utah. Alabama, Florida, Georgia, Indiana, Ohio, and Pennsylvania recognize common-law marriages established before a specific date.
In states that recognize common-law marriage, property is divided the same way as it would be for formally married couples. There are nine community property states: Arizona, California, Idaho, Louisiana, Nevada, New Mexico, Texas, Washington, and Wisconsin. In these states, debt incurred during the marriage is split 50-50. In the 41 states that have "equitable division", sometimes called "'common law' division", courts consider a couple's finances when dividing debt incurred together.
There is no one "right" answer to this question. One option is to split everything 50-50. However, if your incomes are not equal, one person may be contributing much more than the other. Another option is to calculate each person's contribution to a joint account based on their income. For example, if one person makes $42,000 a year and the other makes $63,000 a year, their shared monthly expenses of $2,500 would be split $1,000 and $1,500, respectively.
