• Discounts and special offers
  • Subscriber-only articles and interviews
  • Breaking news and trending topics

Already a subscriber?

By signing up, you accept Moneywise's Terms of Use, Subscription Agreement, and Privacy Policy.

Not interested ?

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.

Invest in real estate without the headache of being a landlord

Imagine owning a portfolio of thousands of well-managed single family rentals or a collection of cutting-edge industrial warehouses. You can now gain access to a $1B portfolio of income-producing real estate assets designed to deliver long-term growth from the comforts of your couch.

The best part? You don’t have to be a millionaire and can start investing in minutes.

Learn More

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.”

Sponsored

This 2 minute move could knock $500/year off your car insurance in 2024

OfficialCarInsurance.com lets you compare quotes from trusted brands, such as Progressive, Allstate and GEICO to make sure you're getting the best deal.

You can switch to a more affordable auto insurance option in 2 minutes by providing some information about yourself and your vehicle and choosing from their tailor-made results. Find offers as low as $29 a month.

Adam Palasciano Freelance Writer

Adam Palasciano is a freelance contributor to Moneywise.

Disclaimer

The content provided on Moneywise is information to help users become financially literate. It is neither tax nor legal advice, is not intended to be relied upon as a forecast, research or investment advice, and is not a recommendation, offer or solicitation to buy or sell any securities or to adopt any investment strategy. Tax, investment and all other decisions should be made, as appropriate, only with guidance from a qualified professional. We make no representation or warranty of any kind, either express or implied, with respect to the data provided, the timeliness thereof, the results to be obtained by the use thereof or any other matter. Advertisers are not responsible for the content of this site, including any editorials or reviews that may appear on this site. For complete and current information on any advertiser product, please visit their website.