One of the more noteworthy parts of property law when it comes to divorces in Texas is how Texas differs from most states regarding how property is classified, characterized, and divided at the time of a divorce. Whereas most states adhere to common law principles when characterizing and dividing property, Texas differs from the norm. Specifically, Texas is a Community property state. This fundamental difference between Texas in most states is where we will begin today's blog post.
When we talk about property and divorce in Texas, it is fruitless to do so without first getting into the basics of Community property law. If we talk about reimbursement or any other subject related to Texas property before we establish the basics of Community property, we are doing you a significant disservice. Rather, you need to be aware of what Community property means for you and your divorce. From there, we can better establish when concepts like reimbursement become applicable.
Community property and Texas divorces
Community property defines how not the only property is classified in a Texas divorce but also how it is ultimately divided. These are the central issues in a divorce case. You will need to figure out to what extent the property you own is classified with the community estate in which portion is classified as being part of your separate estate or that of your spouse. Texas adheres to principles regarding property that is based on positions leftover from Spanish civil law. The vestiges of this area of the law can result in different outcomes than you may be anticipating.
For one, most people I have come into contact with regarding property issues and divorce assume that the spouse who earns the income that helps purchase property tends to end up with the property at the end of a divorce. An example of this way of thinking would be the spouse who works and earns the income utilized to pay the mortgage on the home to keep the home after a divorce because they “paid” for the house. If you were the stay-at-home spouse and contributed no income to the home, you would not have an interest in the home.
This is not how community property law treats assets like a family home in Texas. The main difference is that in Texas, all property is in existence when a divorce is considered to be owned by both spouses. The property owned is owned 50% by 1 spouse and 50% by the other period; rather, both spouses own a full incomplete stake of ownership in the particular piece of property or asset. There is no difference between the spouse whose income was utilized to purchase the asset and the spouse whose income was not utilized.
This cannot be very clear. For one, if you purchased property or acquired an asset in the income utilized in purchasing that asset was Aaron during the course of your marriage, then it is community income and Community property. That means that the property will have to be divided in the divorce. Determining which property falls into this category in which property does not will be the entire key to your divorce. This is one of the many reasons why it is advisable to have an attorney to assist you in your divorce case. Learning the ins and outs of Community property law during a divorce is incredibly difficult to do. An experienced divorce attorney will have worked not only with clients like you facing similar circumstances but in dealing with Community property, as well.
On the other hand, separate property is owned by either you or your spouse before your marriage. For example, if you purchased a home before your marriage, that home is separate property. It is very little you can do to change the characterization of a separate property asset. Separate property cannot be divided in a Texas divorce. If you and your spouse disagree on how to characterize a particular asset, that may be something you have to negotiate through in mediation or ultimately bring up to a judge in a trial.
Inventory and appraisement
At the beginning of a divorce case, you and your attorney will spend some time completing what is known as an inventory and appraisement. This is the form that will guide the negotiation in handling Community property-related issues in your divorce case. An inventory requires that you go through all of your property to distinguishing what Community property is and what is separate property. No matter where you believe the property falls as far as being part of either category, you will need to estimate the property's value. By doing so, you can allow the court and your opposing party to understand where you are coming from when you characterize the asset and negotiate over it during the divorce.
When it comes to completing this type of document, one of the most difficult aspects of doing so relates to completing a form when you may not have access to all of the information. For example, you may have left the family home at the beginning of your divorce only to find that you don't have access to the home whenever you want. If this is the position you find yourself in, you should consider following a piece of advice that I recommend to our clients with some frequency.
Before filing your divorce or as soon as you are served with divorce papers, I would recommend going through your home and videotaping or photographing every room in the house, including safes, garages, and closets. This will allow you to have some degree of evidence of Gov property as it stood at the time of your divorce. If you are barred from future access to the home or legitimately lose access through a court order, you will be able to refer to the documentary evidence of what property was in existence when your divorce was filed.
I'm not saying that your spouse will be up to something to errors in your divorce, but it is wise, in my opinion, to verify, but nothing is going on with your property without your knowledge. I like to tell some clients about this subject related to a former client who was a Montgomery County resident but frequently worked out of town. This gentleman worked in oil and gas and found himself working on the East Coast quite a bit. Essentially, he would come home for changes of clothes and see his son and then go right back out on the road. At the beginning of his divorce, he returned home and was able to gain access to the house for the change of clothes, and two get some personal effects. While he was at home, the client attempted to gain access to a safe in his garage, where he kept his cash and other items. Imagine the shock on his face when he opened the safe to find no money in the safe and that many of his personal effects were gone.
Upon closer inspection, our client found that the key code keypad on the safe had been tampered with. This was an obvious red flag and resulted in him contacting a local locksmith. Fortunately, the locksmith was very familiar with our client and his safe. The reason they were so familiar with one another was that the locksmith had just been to the house earlier that day. That's right: the locksmith that our client had called to take a look at the safe because of the tampering issue had been the very same locksmith who had been out earlier that day to look at the safe. The only difference is that Mark Smith had been called earlier by the man's wife.
The locksmith was beneficial in showing our client I'm providing him a copy of the receipt showing that his wife had used her debit card to pay for any access to the safe. We allowed his wife and his wife's attorney to be honest with us about using the locksmith to gain access to the safe, which initially they were not willing to provide. Fortunately, we were very clear that we had evidence of the misuse of the locksmith services; after that point forward, she and her client were accommodating and ensured the money taken was returned in full.
What is the moral of the story? For starters, you need to be aware that weird things happen during divorce cases. People stop thinking clearly and rationally intend to act in ways that they otherwise may not under normal circumstances. I don't necessarily think that our client's wife is a bad person or prone to lying, but I know that she acted badly under those circumstances and did lie. Fortunately, our client happened upon a piece of evidence that could protect him. However, had he followed through and videotaped or photographed property like this, we would not have run into such an issue.
What is reimbursement in a Texas divorce?
Now that we have walked through what Community property means in the context of a Texas divorce, we can now discuss in greater detail what reimbursement actually is as it pertains to that subject. As it stands, reimbursement has a great deal to do with reimbursing the community estate when community funds are utilized to pay for or benefit the separate property of either you or your spouse. We see situations like this arise most commonly in connection to residences or real estate.
Let's walk through an example to illustrate better the point we're trying to make. Let's imagine a situation where you owned a home before your marriage. The house was purchased as your separate property about five years before you getting married when looking at the inception of title rule when you put earnest money down in the home when titled to the home invested in you. Given that this took place long before your marriage, the house is pretty clearly your separate property.
You lived in the home as your separate property for five years before getting married. Once you got married, you and your wife moved into the home and continue to live there for years after your marriage began. There were still mortgage payments to be made on loan at the time of your wedding, and subsequently, the loan was paid in full using community income funds. This means that money earned at your job and your spouse's job was utilized it paid alone. Neither of you thought anything of this until a few years later, when you filed for divorce from your spouse.
You and your spouse needed to answer whether or not at home became part of the community estate, given that community funds were used to pay the loan off or if the home remained part of your separate estate. Even if the house did remain part of your separate estate, the question that raced through your mind was that it seems that this will be too good to be true given that Community property was used to pay off the loan. In a Community property state like Texas, wouldn't your spouse be able to gain some interest in the house from a financial standpoint if community income had been used to pay off the loan?
You should be happy, on some level, to learn that your instincts were correct. If community funds are utilized to pay off alone or make payments on a house or any other piece of property, and those payments came from community income, then there is a likely hood for a reimbursement claim to be had. A reimbursement claim will allow your community estate to be payback for funds utilized to benefit your separate property asset. A reimbursement is a form of equitable relief very court would likely choose to utilize in this case given that it is fair for your spouse to see some benefit for her community income having been used to benefit an asset that cannot be divided and her benefit during the divorce.
You should speak to and work with your experienced family law attorney when determining and figuring out the take center which your wife would make a reimbursement claim in this type of instance. In practical language, if you owe a portion of the community estate a reimbursement, that may require you to move around some cash to make sure that the mergers and later side versus separate equation balance out evenly.
Additionally, we need to ensure that the community state needs to be reimbursed in the 1st place. I have sing party successfully proved that the funds utilized to pay a housing situation like this were actually a separate property of the spouse who owned the home. It may take some tracing and the use of a forensic accounting expert witness to do this, but you should look to any mechanisms as being in play when it comes to protecting your interest in a divorce.
Does refinancing a separate property home during a divorce change its characterization?
The last subject I wanted to discuss with you is whether refinancing at home during your marriage can change separate property into a community asset. Using the above example, suppose that your spouse refinanced oh that was your separate property during the course of your marriage. Since Texas is a Community property state, the mortgage lender likely required that your spouse's name appears on the deleted trust. Does this act create a Community property interest in the home?
Almost assuredly, the answer to this question is no. Typically, refinancing at home that is part of your separate estate during your marriage creates the Community property interest in the home. Again, well, Community property funds are used to pay the mortgage, then the reimbursement claim may be a new making. Additionally, if you did add your spouse to the interest and her a share of that, this will likely be construed as a gift, and your spouse would have a separate property interest of their own in the home. Basically, in that case, the house would be jointly own separate property of both you and your spouse.
Questions about the material contained in today's blog post? Contact the Law Office of Bryan Fagan
if you have any questions about the material contained in today's blog post, please do not hesitate to contact the Law Office of Bryan Fagan. Power licensed family law attorneys offer free of charge consultation six days a week in person, over the phone, and via video. These consultations are a great way for you to learn more about the world of Texas family law and how your family circumstances may be impacted by filing a divorce or child custody case. I appreciate your interest in our law office, and. We will join us again tomorrow as we continue to post relatable and relevant information about the world of Texas family law here on this website.