If you’re planning to divorce in Texas, you’ll want to familiarize yourself with Texas community property state laws. That’s right, Texas is a community property state, which does affect how a marital estate will be divided in the event of divorce or an annulment. Texas separate property laws may also come into play if you owned property prior to marriage or if the property was gifted to you during the marriage. We provide insight into Texas community property, separate property and more in the article below.
Is Texas a Community Property State?
Texas is among nine states classified as a community property jurisdiction. Typically, this states that any property obtained by a couple during their marriage (with a few exceptions) is owned by both spouses. This can greatly affect how assets are divided in divorce.
What does community property mean in Texas? In the event of divorce, Texas community property laws state that marital property will be divided between the two parties—but don’t assume that means a 50/50 split. The general rule of property division in Texas (Section 7.001 of the Texas Family Code), states that a couple’s Texas community property will be divided based on what the court believes is “just and right,” and the court will take into
During a divorce, it’s also pertinent to know that there is a presumption in the state of Texas that the property either spouse possesses from the date of marriage up until the date of divorce is presumed to be community property. That may include anything ranging from assets accumulated in retirement accounts to real estate to vehicles to livestock to home furnishings and more.
Why is this presumption important? It’s important because if you want to claim that a piece of property is actually your own separate property of which you have sole ownership—and not jointly owned as a part of the marital estate—the burden would be on you to prove that assertion with clear and convincing evidence. And that isn’t always easy. We’ll explain why overcoming that burden can be challenging later in this article.
For the record, Texas isn’t the only state in the US with community property laws; it is one of nine states that do. What states in the US have community property laws? Along with Texas, other US community property states include: Arizona, California, Idaho, Louisiana, Nevada, New Mexico, Washington and Wisconsin. While community property laws may be similar from state to state, you’ll find distinct differences in laws among other community property states..
What is separate property in Texas?
According to Texas Family Code Chapter 3.001, Texas separate property (the property one spouse solely owns) is generally defined as:
- The property owned or claimed by the spouse before marriage;
- The property acquired by the spouse during marriage by gift, devise or descent; and
- The recovery for personal injuries sustained by the spouse during marriage, except any recovery for loss of earning capacity during marriage
As mentioned earlier, the state of Texas presumes the property a couple owns is community property, so if you want to establish certain property as being separate—whether it’s a cash inheritance, personal injury settlement, prized family heirloom or classic car—it’s best to do so sooner rather than later. One way to accomplish this is to designate each party’s separate property in a prenuptial agreement or post-marital agreement.
As for property acquired by way of “gift, devise or descent,” that can include gifts spouses give to each other. Texas community property laws clearly state that when one spouse gives the other spouse a gift, that gift generally remains the spouse’s separate property. However, it isn’t always that cut and dried.
For example, if a husband paid cash for a diamond necklace for his wife and gifts it to her for her birthday, that necklace would typically be considered her personal property to keep, free and clear. Now if the gift the spouse receives was a BMW, and community funds are being used to pay the loan on the car, and the gift giver’s name is on the title, walking away with the “gifted” car could get complicated. Check out our recent blog, “Who gets the car?”, to learn more.
When does separate property become community property in Texas?
In reality, it’s not really an issue of when does separate property become community property. It’s usually a matter of whether or not you can prove separate property is actually separate property. If you previously executed any type of formal separate property agreements to clarify what items are separate property (like a prenup or post nuptial agreement), you’re golden.
Under Texas law, the state of Texas also operates under the inception of title rule (Texas Family Code 3.006). That means if the title to a piece of real property you own shows you purchased it prior to marriage, that evidence could help you overcome the presumption of community property.
Keep in mind, if the asset is producing income during marriage, that income would generally be considered community property. Say recorded deeds and notarized purchase agreements prove you purchased some apartment buildings before marriage and collect rent during marriage. Even if you used your own separate funds to purchase real estate prior to marriage, the income from that rent (minus expenses, insurance, taxes, etc.) would be considered community property in a Texas divorce, unless you and your spouse formally agreed to other arrangements.
The waters get especially muddy when comingling of separate property and community property occurs during marriage. Just think about how often people move a joint bank account from one bank to another, sell houses, use proceeds from those sales for home improvements and otherwise move assets around during marriage.
For example, say you received a $100,000 inheritance from your Aunt Josephine and deposited that money in the bank. Then, during the course of marriage, you and your spouse deposit $50,000 in community funds into that same bank account, while making withdrawals to remodel your kitchen and fund other home improvement projects during the marriage.
Upon divorce, $25,000 remains in the bank account, so what portion of that money is separate property and what portion is community property? In this case, Texas’ community out first rule might apply. In simple terms, that might mean the remaining $25K would be separate property. However, if the bank account had been drained down to zero at some point, and it was gradually replenished with community funds back up to the $25K, the court would likely view the $25K as community property.
As you can see, commingling of separate and community property funds probably isn’t the best idea if you want to keep an inheritance from a relative (the “descent” portion in the “gift, devise or descent” rule of separate property) or a gift of money or property from a non-relative (the “devise” portion of the same rule) separate, should you divorce.
Is it worth it to fight over separate property during divorce?
Sometimes but not always. As noted above, overcoming the presumption of community property or joint property can be challenging, not to mention expensive. First, you will need to precisely trace the history of the asset and where any associated monies came and went, then determine a valuation for the asset. Second, you may need to hire a tracing expert to follow the money trail, which could end up costing you more than what yours or the other spouse’s separate property is actually worth.
For example, say you’re in a long-term marriage that started out with property gifted by family. That gift was initially a nominal amount that morphed into other investments over time. It could be very difficult to prove the enhanced value of that separate property, and it needs to be traceable in order for it to be reimbursable to one side. Meanwhile, you’re paying thousands of dollars to a tracing expert, who may or may not be able to produce the clear and convincing, beyond a reasonable doubt evidence you need.
That’s not to say it’s never worth it to go through the process to trace and determine the value of separate property. In many cases it is. You just need to determine if it’s worth the time, money and stress in your particular case. An experienced family law attorney can tell you more about community property laws in Texas and help you weigh your options.
Is Texas a community property state FAQs
Is Texas community property division influenced by the duration of the marriage?
Generally speaking, the primary factor Texas courts consider when determining how a marital estate will be divided is what marital assets and debts the couple acquired during the marriage—from the date of marriage until the date of divorce. However, the goal of Texas family court judges is to come up with an equitable distribution of those assets and debts that is “just and right.”
How long a couple has been married could have an impact on the “just and right” division of a couple’s equally owned marital assets. For example, say a couple has been married 25 years and one spouse’s health is poor, the court may decide that it is “just and right” to tip the divorce settlement a wee bit in that spouse’s favor to help subsidize healthcare costs. This scenario would be less likely for a couple who has been married for a handful of years. Of course, the circumstances of every divorce are unique, so it’s best to ask your divorce lawyer if the duration of your marriage could have an impact on your divorce settlement, or if you would qualify for spousal maintenance (spousal support).
How do community property laws in Texas address debts incurred by one spouse?
When it comes to debts and community property, Texas Family Code § 3.201-3.203 details how liabilities are handled during divorce. In general, debts a couple takes on together, like a mortgage on their home, would be subject to equitable division during divorce. Under Texas community property state laws, a spouse may also be liable for the other spouse’s actions, when:
- The spouse acts as an agent for the person.
- A spouse fails to fulfill a duty of support for their spouse, so another party provides money or goods to the spouse, resulting in a debt being owed to the party who helped out. (See Texas Family Code Chapter 2, Subchapter F.)
If a spouse takes out a business loan for a business that is in their sole management and control, the other spouse generally wouldn’t be responsible for it. The same would likely hold true for a spouse who incurred student loan debt during marriage. Those debts would generally be considered one spouse’s sole responsibility, unless the couple has formally agreed otherwise.
In addition, just like separate property acquired prior to marriage, any debts accrued prior to marriage are generally not considered a part of a couple’s estate, as it pertains to community property in Texas. Also worth noting, if a spouse is involved in a civil lawsuit during marriage and they incur a financial judgment against them as a result, that judgment may be considered a liability against the community estate. These are just a few examples, and every case is unique. Again, it’s best to speak with a lawyer about debts you and/or your spouse have accrued during marriage.
What is considered community property in Texas for couples with no children? Does it differ?
The fact that a couple has children doesn’t affect what would be classified as community property or separate property in Texas. If a spouse owned separate property prior to marriage, whether it be a home or a cherished heirloom, it would still be considered separate property during a divorce with or without children.
How the actual community property is divided during divorce may, however, be affected by the fact that a couple has children but it depends on the situation. For example, if both parents want to stay in the marital home after divorce and one party has been acting as a stay-at-home parent in the home, the court may decide to allow that parent to take sole possession of the home, provided other assets are awarded to the other parent to ensure fair and equitable division of assets occurs. Once a couple agrees how their community property will be divided, their attorneys can help them execute necessary documents, like property transfer agreements and updated deeds and titles, to clarify who rightfully owns each asset.
What is community property in Texas for couples who are legally separated but not divorced?
Hold your horses, there is no such thing as legal separation in Texas, even though it’s something that is recognized in other states. That means any assets and/or debts you and your spouse jointly acquire during marriage until the divorce is finalized is what is considered community property in Texas. However, you and your spouse could formally agree to do otherwise by inking your wishes in a legal agreement, while you wait for the divorce to be finalized.
Community property Texas laws are complex. We can help you make sense of things.
If you have questions about divorce and Texas community property division, and you live in the Dallas / Fort Worth area, the knowledgeable attorneys at the Sisemore Law Firm are here to help. In addition, if you’re planning to marry or have recently married, we also recommend consulting a family law attorney to learn how you can earmark separate property through a prenuptial or post-marital agreement or estate planning mechanisms.
To schedule a confidential consultation with a family lawyer at our firm, please contact our office at (817) 336-4444 or connect with us online.
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