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What is a community property state?

In essence, your spouse's debts are also your debts.

In community property states, all assets and debts that are taken on during your marriage (with few exceptions) are considered equally owned by both spouses. In the event of divorce, anything accumulated during the marriage is split 50/50.

It doesn’t matter who’s name is on the asset or debt since the legal union binds both individuals. So, all financial assets that come into the marriage are typically considered community property.

Here are a few examples — aside from the aforementioned credit card debt — of community property in a marriage:

  • Earned income from either partner during the marriage.
  • Any accumulated bank or investment accounts.
  • Retirement accounts created during the marriage as well as the contributions made to pre-existing retirement accounts during the marriage.

Therefore, Jane would be held responsible for her husband's credit card debt that was incurred during the marriage if he were to suddenly pass away.

However, if Jane’s husband incurred any debts before the marriage or after a legal separation (such as divorce), Jane would be off the hook because, as Orman pointed out, “they are considered his debts and you would not be responsible for those unless you specifically agreed to take on such debts.”

One of the biggest safeguards against having this happen to you is to ensure your spouse or long-term partner are financially savvy and responsible before you tie the knot. It could save you from a huge headache later on.

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These states have community property laws

While the majority of U.S. states don’t have community property laws, these laws currently apply in nine states:

  • Arizona
  • California
  • Idaho
  • Louisiana
  • Nevada
  • New Mexico
  • Texas
  • Washington
  • Wisconsin

Although nine states may not seem like a lot, the population of these areas makes up roughly 25% of the U.S.’s total population. That’s no small figure.

It’s possible to opt out if you sign a prenuptial agreement before the marriage. In essence, a prenup is an agreement made by a couple that determines the ownership of their individual assets should they divorce down the road.

In fact, 50% of Americans revealed they were open to the idea of signing a prenup, according to a Harris Poll survey conducted for Axios.

In particular, younger Americans are more inclined to sign on the dotted line, with 41% and 47% of engaged or married Gen Z and millennials, respectively, expressing an interest in prenuptial agreements.

What to do if you get stuck with your spouse’s debt

In the unfortunate event that you get stuck with your spouse’s debts in one of these nine community property states, there are some things you can do to help your financial situation.

Start by reviewing your finances and create a spreadsheet that includes any other outstanding personal debts and an estimate of your monthly expenses. Budgeting aggressively or consolidating the debt is a possible option.

For example, credit card interest rates tend to be quite high. Consider consolidating the debt into a personal loan with much lower interest rates. That way, you can manage payments more easily and prevent the debt from ballooning even more.

For Jane, the avalanche method might help, too. Essentially, you pay off your largest debt first — in this case, her husband’s credit card debt — so that she gets it off her plate faster than any other smaller debts she may have incurred.

Jane can also offset some of the debt by bringing in more income. Although she didn’t state her profession — or whether or not she was retired — you can bring in more income through a side hustle, by selling your belongings online or by renting out space if you’re a homeowner.

In the end, ensure you and your spouse are in good financial standing before you say “I do.”


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Adam Palasciano Freelance Writer

Adam Palasciano is a freelance contributor to Moneywise.


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