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What You Need to Know Regarding Marital Property in Texas Prior to Your Divorce

Understanding the intricacies of property division in your divorce, including assets owned individually or jointly with your spouse, is paramount. The rules governing property division serve as a framework if agreement cannot be reached before trial. Remember, you can also establish agreements before marriage (premarital agreement) or during marriage (marital property agreement). This ensures clarity and protection under the inception of title rule in Texas.

Essentially, it’s important to recognize that property exists in various locations—your home, office, vehicle, and elsewhere—that may be owned jointly, solely by you, or solely by your spouse. Understanding these parameters is crucial as we delve into this topic.

What is separate property?

Property owned before marriage or acquired through gift or inheritance during marriage is typically considered separate property. Additionally, if income is used to acquire property during marriage, that property is also classified as separate. Through agreements such as marital or premarital property agreements, spouses can designate certain property as separate even if it would otherwise be considered community property.

What is community property?

Community property, as defined by the Texas Family Code, encompasses all property that is not classified as separate. Upon divorce, there’s a presumption that all property is community. However, this presumption can be challenged. That is, if you or your spouse can provide evidence to demonstrate that specific property should be considered separate.

Typically, community property encompasses earnings from jobs and income generated during the marriage. This is regardless of whether it’s from community or separate property. Given these considerations, individuals with significant wealth or property should consider discussing a premarital agreement with their future spouse.

Questions on how property will be classified? Look at the title

In Texas, when spouses disagree on the classification of property as community or separate, the inception of title rule is utilized to resolve such disputes. This rule hinges on the moment when the property was initially acquired or purchased. It serves as the decisive factor regardless of subsequent events.

An example to better make our point on community versus separate property

Certainly! In this scenario, community income was used to make mortgage payments after marriage. However, the inception of title rule dictates that the property’s classification is determined by its status at the time of acquisition. Since the home was purchased before marriage, it remains separate property.  Thereby it excludes your wife’s claim to ownership in the event of divorce.

Absolutely correct! According to the inception of title rule, the house retains its status as your separate property since it was acquired before marriage. Therefore, despite using community income to cover mortgage payments during the marriage, your wife wouldn’t have a claim to the property in the event of divorce.

Indeed, your wife may have a reimbursement claim to recoup the funds spent on the mortgage payments. However, in terms of ownership rights, the house remains solely yours.

How the inception of title rule can affects recent Texas residents

Even after relocating to a community property state like Texas from a non-community property state such as Minnesota, the separate property rights established in the previous state remain protected. In Minnesota, salaries are considered separate property for each spouse. This classification remains intact regardless of the change in residency.

It’s essential to recognize that being named on the title of a property doesn’t always determine ownership. Even if both you and your spouse’s names are on the title of a house purchased before marriage, it remains your separate property. Adding your spouse’s name to the title post-marriage doesn’t alter the property’s classification.

On the flip side, if you buy a boat during your marriage and only your name is on the title, it can’t be considered separate property. Because the purchase occurred while married and the title was acquired during marriage, it qualifies as community property.

How credit is treated in a divorce

These days, it seems like almost everyone has a credit card. While in the past, maybe every other person had one, today, most people carry multiple charge cards in their wallet. Therefore, it’s crucial for you to grasp how credit is handled in a Texas divorce.

When you purchase an asset during your marriage using credit, it’s considered community property. The credit account, in turn, becomes community debt. However, an exception to this rule exists if you can demonstrate that a creditor solely evaluated your or your spouse’s credit history, income, etc., in determining whether to extend the loan.

Blending separate and community property in bank accounts can lead to problems

When community and separate property funds are mingled in a shared bank account, distinguishing between the two can become challenging in terms of characterization.

Under the Texas Family Code, there’s a presumption that community funds are withdrawn before separate funds from joint accounts. For instance, if your spouse withdraws all community property funds from a bank account, subsequent deposits won’t replenish their separate property. Instead, they’ll replenish the community property share. This is crucial to note when managing joint accounts. Any separate property interest will only be credited up to the lowest balance in the account. For example, if you initially deposit $30,000 from inherited funds and later withdraw to a balance below that, your separate property interest is limited to the lowest balance.

More questions on property and divorce? Come back to our blog tomorrow to read more on this subject

If you’ve gone through today’s blog post and need further clarification or have questions, join us tomorrow for more insights on this critical subject. Whether you have specific or general inquiries, feel free to reach out to the Law Office of Bryan Fagan, PLLC. Our licensed family law attorneys are here six days a week to assist individuals like you, providing guidance on various family law matters.

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Other Articles you may be interested in:

  1. What Every Entrepreneur Needs to Know About Community Property Division
  2. What is community property in Texas?
  3. The details on community property division in Texas
  4. Community property in a divorce vs community property in probate
  5. Community Property Survivorship agreement vs a Will (Estate of Lovell)
  6. Key facts about community property laws
  7. Who gets what? Understanding Texas community property laws
  8. Distinguishing between Community and Separate Property in Texas divorces
  9. Community property issues in Texas divorces: Wasting of assets by spouses
  10. Community Property in Texas: What you need to know before you get divorced
  11. Community Property issues in Texas family law cases
  12. How does a judge divide up community property in a Texas divorce?
  13. What happens if you and your spouse mix community and separate property?
  14. How is income from separate property treated in a Texas divorce?
  15. What is the dual classification of property as partly marital and partly separate?
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