Texas Community vs. Separate Property
Sorting through the "stuff"
When we talk with clients in divorce and estate planning matters the idea of community and separate property inevitably comes up. Texas is a community property state, meaning that when a court seeks to divide up say a martial estate in a divorce, the court first determines what is separate and what is community property. The key is that separate property is never part of a divorce division. Separate property is the property of that spouse and is not on the table. Community property is squarely on the table for a “just and right” division of assets.
"Separate property" is property either
- owned or acquired by a spouse before marriage, or
- acquired by a spouse during marriage by either
- gift or
The date you acquire property is the key, everything before the marriage is separate, everything after, with a very few exceptions is community. Separate property can “mutate” or change forms, for example a wife may have an amount of cash that is her separate property, she can then purchase an item with that cash and the item, even if purchased during marriage is her separate property.
As far as gifts go, we’re dealing with intent. A gift includes any Christmas or birthday gifts from one spouse to another during the marriage, regardless of the funds used to purchase that gift. So if community funds are used to purchase the gift, it doesn’t matter, it’s going to be separate property.
The law presumes that all property is community property unless proven otherwise. Therefore a court will require you to prove by clear and convincing evidence that each item is separate property.
Community property is everything else. Now what about interest or proceeds from separate property. In Texas, earnings from separate property are community property. So if a husband has a rental home and receives a monthly rent, that rent, upon marriage, is community property.
What about mixed property? This comes up quite a bit, especially when we’re dealing with large purchases, i.e. cars, homes, etc. For example, let’s say a home is purchased for $100,000 dollars using $25,000 down of a wife’s separate property. In that event the 75% of the value would be community while 25% would be separate.
Reimbursement will be its own blog post, but the basics of reimbursement are that one estate, whether a husband’s separate, wife’s separate, or the community estate needs to be reimbursed for some action or benefit given to another estate. For example say a husband owned a car before marriage but still owed money on the note, then, during marriage, community funds were used to pay off that note. The car is still the husband’s and the court cannot use it for a just division, however, the community estate can make a claim for reimbursement for the funds used to pay the note down during marriage.
All marital property can be traced to either community or one party’s separate estate. How property is characterized is crucial in determining a just and right division of property.