Community property and buying a home in Tennessee

What counts as community property, and why Tennessee is different

In a community property state, most property that spouses acquire during the marriage belongs to both of them equally by default. The IRS publication on the subject covers nine states: Arizona, California, Idaho, Louisiana, Nevada, New Mexico, Texas, Washington and Wisconsin. Tennessee is absent from that list.

Instead, Tennessee treats the home like any other property in a divorce. The statute says that in a divorce the court must equitably divide, distribute, or assign the marital property between the parties, without regard to marital fault, in proportions the court considers just, based on a list of factors in subsection (c) of T.C.A. 36-4-121. The statute leaves the proportions to the court rather than fixing a 50/50 split. A 2022 law (Public Chapter 762) also added a factor on the attorney fees each spouse has paid, and a rule for who pays marital debt.

If a court makes a final division at the time of a legal separation, property acquired after the decree is separate property, the statute says.

Because the rules turn on the facts of each marriage (when the home was bought, who paid, gifts, inheritances), a Tennessee family-law attorney is the right person for a specific situation.

How spouses can hold title to a home

Tennessee’s Medicaid agency, TennCare, summarizes the common ways to own real property in its policy manual (August 2025):

Source: Division of TennCare, Policy Manual 010.060.

TennCare also states that real property held jointly by two spouses is held as tenants by the entirety unless the deed explicitly states otherwise. That is why the wording of the deed matters when a married couple buys a home. Our guide to title insurance explains how the deed and title are checked, and our home buying steps show where the deed fits in.

The community property trust option

The Tennessee Community Property Trust Act was enacted as Public Chapter 658 (House Bill 3863), passed unanimously in both chambers, and took effect on July 1, 2010. Under the Act as passed in 2010 (check the current Code for later amendments):

• Opt-in. Spouses may classify any or all of their property as community property by transferring it to a community property trust and saying so in the trust (35-17-105). They may do this whether or not either of them lives in Tennessee.
• Formal requirements (35-17-103). The trust must expressly declare that it is a Tennessee community property trust. It must have at least one qualified trustee, meaning a Tennessee-resident individual or a company authorized to act as a fiduciary in the state, whose powers include keeping the trust’s records and preparing its income tax returns. Both spouses must sign it. A warning must appear in capital letters at the start, stating that the consequences “may be very extensive,” including the spouses’ rights during marriage and at divorce.
• Flexibility (35-17-104). Spouses can agree on rights in the property, management and control, what happens at divorce or death, and the governing law. Either spouse may amend the trust as to their own one-half share at death; otherwise it can be amended or revoked only if the agreement allows it.
• Creditors (35-17-106). A debt of only one spouse can be paid from that spouse’s one-half share. A debt of both spouses can be paid from the trust.

At death and at divorce

At a spouse’s death, one-half of the aggregate value of the trust’s property is the surviving spouse’s share and the other half is the decedent’s (35-17-107). At dissolution of the marriage, the trust ends and the trustee distributes one-half of the trust assets to each spouse, with each receiving one-half of each asset, unless both spouses agree otherwise in writing (35-17-108).

An illustration

Suppose a couple places a home worth $438,800 (the 2024 Census median value for Nashville, used here only as a round example) in a community property trust. If the marriage ended, each spouse would be treated as owning one-half, about $219,400 of value, unless they had agreed otherwise in writing. Without the trust, a court would instead divide the marital property equitably using the factors in 36-4-121.

Federal taxes

The IRS states in Publication 555 that it does not address the federal tax treatment of income or property under the “community property” election of Alaska, Tennessee and South Dakota. If you are considering a trust, ask a tax professional how it affects your return. Also see our guide to capital gains on a home sale.

What buyers should do

• Check the deed wording before you sign: it decides whether the home is held by the entirety, in common or as joint tenants.
• Ask whether a trust is involved if you buy from, or with, a couple who say their property is in a community property trust. The trust document says who has authority to sign.
• Use the right professional. Choosing a title form or a trust affects divorce, death and creditors. A Tennessee attorney can advise on your case; see our page on whether you need a real estate attorney in Tennessee.

For the rest of the buying process in the state, see closing costs in Tennessee and buying a home in Nashville.