Key Takeaways:
- Texas is a community property state. The state presumes assets and debts acquired during marriage are jointly owned.
- Separate property will be considered. Assets owned prior to marriage, or received as gifts or inheritance prior to divorce, may be categorized as separate property, as long as the burden of proof is met.
- Commingling blurs lines. Mixing separate and community assets can make property division challenging during divorce.
- Division of property isn’t always 50/50. Texas courts aim for a “just and right” division of the marital estate based on the unique circumstances of each case.
- Legal separation isn’t a factor in Texas. Texas does not recognize legal separation, so all property accumulated during marriage and until a divorce is final is presumed to be community property.
If you’re planning to divorce in Texas, you’ll want to familiarize yourself with Texas community property state laws. Many people begin their search by asking, “Is Texas a community state?” Yes, Texas is a community property state, which affects many factors, including how to divide property in the event of divorce or an annulment. For couples that are in an informal marriage, also known as a marriage by common law in Texas, community property laws may also apply.
Brief Summary:
In this article, Texas family law attorney Justin Sisemore explains how community property laws work in Texas and what they mean for divorcing couples. He outlines the difference between community and separate property, how courts decide what’s fair in the “just and right” division of a marital estate, and why documenting ownership is key to protecting assets as separate property during divorce.
Is Texas a community property state in divorce?
Yes, Texas is among nine states classified as a community property jurisdiction during divorce. This means 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 a divorce. In addition, even if property is titled in the name of only one spouse, it is still presumed to be community property and may be subject to division upon divorce.
How Texas defines community property in divorce
In the event of divorce, Texas community property laws state that marital property will be divided between the two parties—but that doesn’t necessarily mean 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 deems is “just and right.” The court will consider the rights of both parties and whether the couple has any children.
What is community property in Texas?
Community property typically includes any assets accumulated from the date of marriage until date of divorce. This may include assets held in financial institutions, 401ks and other retirement accounts, real estate, vehicles, livestock, home furnishings, business holdings and more.
Presumptions under Texas community property law
Texas law has established specific presumptions that determine how property is classified during divorce. When it comes to property rights during divorce, Texas, as a community property state, presumes any assets obtained or real estate purchased during marriage falls under the category of community property.
Why is this important? If you want to claim that a piece of property is separate property— you have sole ownership and it’s not jointly owned as a part of the marital estate—the burden will be on you to prove that assertion with clear and convincing evidence. That isn’t always easy. If a person is able to prove that property is separate, the actually property and the value of that property is not considered in a division of assets and debts.
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 compared to Texas community property law.
What is separate property in Texas?
We’ve addressed the question, is Texas a community property state for divorce? Yes it is, but when considering Texas community property state laws, you must also consider how the state defines and deals with separate property. According to Texas Family Code Chapter 3.001, items considered separate property (the property one spouse solely owns) are 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.
- The recovery for personal injuries sustained by the spouse during marriage, except any recovery for loss of earning capacity during marriage.
If you need further clarification about separate property in your specific case, say a friend gifted you a precious heirloom or your employer reimbursed you for lost wages, contact your divorce attorney for insight.
Proving and protecting separate property in Texas
As mentioned earlier, Texas presumes the property a couple acquired during marriage is community property. If you want to establish that certain property is 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 before any divorce litigation begins.
As for property acquired by way of “gift, devise or descent,” that can include gifts spouses give to each other. Texas marital property laws clearly state that when one spouse gives the other spouse a gift, it generally remains the spouse’s separate property. However, it isn’t always that cut and dry.
For example, if a husband paid cash for a diamond necklace and gifts it to his wife 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, the issue isn’t when separate property becomes community property, but whether you can prove property is separate. Again, if a party wants to claim they solely own a piece of property acquired during marriage, the burden of proof is on that party to provide evidence to support that claim.
Also, if the parties previously executed any type of formal separate property agreement to clarify what items are separate property (like a prenup or post nuptial agreement), that agreement would likely be held as valid and enforceable by Texas courts.
Inception of title rule also plays a role
Under Texas law, the inception of title rule (Texas Family Code 3.006) applies. That means if the title to a piece of 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 is generally considered community property. Say recorded deeds and notarized purchase agreements prove that you purchased some apartment buildings before marriage, and you collect rent during marriage. Even if you used your own separate funds to purchase the real estate prior to marriage, income from that rent (minus expenses, insurance, taxes, etc.) is considered community property in a Texas divorce, unless the spouses agree that other arrangements are in their best interests.
How commingling blurs the lines
Things become especially complicated when separate and community property are commingled 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.
Let’s you received a $100,000 inheritance from your Aunt Josephine and deposited that money in the bank. Then, during the 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. This is why property characterization can be a gray area.
Commingling of separate and community property funds isn’t the best idea if you want to retain 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), 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 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 an expert to follow the money trail, which could end up costing you more than what 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 to be reimbursable to one side. Ultimately, you could pay thousands of dollars to a tracing expert who may or may not be able to produce the clear and convincing 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. Only you can 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 in divorce FAQs
Is Texas a community property state where property division is influenced by the duration of the marriage?
Generally speaking, the primary factor Texas courts consider when determining how a marital estate is divided is the 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.”
The duration of the marriage could impact 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 more toward 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. It is important to remember that even though all liabilities incurred during the marriage are community liabilities, unless proven otherwise, creditors are not parties to your divorce case.
This means that while both parties should be jointly responsible, the creditor is only going to go after the spouse who holds the debt, as the creditor is not under the jurisdiction of the Court. For this reason, we typically advise that each party keep debt in their sole name to ensure credit scores stay stagnant, however, the amount of debt taken on is considered in the division of assets, so if one spouse has more debt than the other, they may get more of the assets to try and equalize the estate.
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 just division of assets.
Once a couple agrees, or the Court orders, 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. Additionally, the Court typically imposes temporary mutual injunctions to preserve and protect community property during the course of divorce litigation.
Community property Texas laws are complex. We can help you make sense of things.
If you have questions about Texas community property laws, divorce proceedings and 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 with extensive experience in community property laws, please contact our office at (817) 336-4444 or contact us online.
