Trying to define separate property without first discussing what community property is is enough to make an attorney’s hair catch on fire. I mean that we family law attorneys typically answer that question by defining community property and then determining what separates the property from what is leftover. This is how vital community property is when it comes to dividing property in a divorce. Community property is the focus. Separate property is a sort of secondary concern.
Why is this? What did separate property ever do Texas attorneys? Not a thing. Individual property is significant to you and your case. It’s not as if personal property is wholly ignored in a Texas divorce. However, separate property is the type of property in a divorce that is not divisible by a court. So, this is the main reason why community property gets the direct billing in a divorce case like yours. Separate property plays a part but is not an active part of your case like community property is.
Why does separate property matter in a divorce?
Ultimately, we need to figure out why separate property matters in your divorce. The “why” behind anything is what informs us, motivates us, and ultimately impacts your decision-making in the context of a divorce case. It’s the question that our kids ask us that makes the most sense but is still annoying at times: Why? Well, let’s go through why separate property matters in your divorce case.
First, it’s time to go over some definitions with you. Separate property is all property that is not community property. Confused? Let’s go back and define community property. All property at the time of your divorce is presumed to be community property. This means that every dollar in your bank accounts, piece of personal property in your home, all your retirement savings, your house, and your vehicles are all presumed to be owned by you and your spouse. Not a 50/50 split, either. Each of you holds all parts of all the property. That’s the presumption, at least.
Where the presumption meets reality is that it would be scarce to have your case be the one where all of your property is community-owned. Separate property is any property owned by either you or your spouse before your marriage or acquired during your marriage either by gift, devise, or descent. Devise means that the property came from another person’s will where you were named as a beneficiary. The decline means that you or your spouse acquired the property from a loved one who passed away without a will. These are the sources of separate property. All other property will likely be counted as community property.
There are a lot of factors in play when we consider how much separate property you are likely to have. First, you would need to look at your age and how long you have been married. If you are a relatively young person and have been married for a rather long period, you likely do not own much in the way of separate property. The fact is that you didn’t have much time to accumulate any property before your marriage. We have already seen how most of the property you will come into ownership of during your marriage is considered community-owned.
I should also point out that income earned during your marriage, for the most part, is going to count as community property, as well. This is a fact that makes some people’s heads spin. Your head may be spinning as we speak. It can be a shocking development to think that you can go to your job and earn money and have it count just as much for your spouse as it does for you in a divorce. However, that’s how community property laws treat income from your 9-5 in Texas.
How is that fair? After all, if you worked more than your spouse, shouldn’t you get credit for that? Why should your spouse receive the benefit of work that they never performed? In our society, where marriages can last for weeks instead of years, this is sort of a jarring thing to read at first. However, let me explain one way that the way Texas treats income earned during the marriage could be seen as more fair than any other method.
Think about if you were a stay-at-home parent. While you may have graduated from high school and even worked a few years before your marriage, you and your husband decided that he would work while you would stay home and take care of the family. It’s not that you couldn’t work or that you even didn’t want to; it’s just that you chose to stay home to care for your family. This plan worked out well for many years. Your husband worked and even went back to school to get a master’s in business administration. This allowed your family to earn more money and generally live a better quality of life. No one had any issues with this until the time of divorce.
Think about the example that I just gave you. Is that a scenario where you think that all the money earned by your spouse should be his after your divorce? Or, do you think you contributed a great deal to the time and effort put in to increase your standard of living and allow your husband to get the education and job opportunities he did? I’m willing to bet that you can see the logic in treating one spouse’s income as both spouse’s income. Marriage is a team effort, matter what. The Community property laws in Texas acknowledge this.
Community property even acknowledges the contributions of a spouse when it comes to separate property. Suppose that you owned a home from before your marriage that you and your spouse do not live in, but you have maintained ownership in the form of holding it as a rental property. If you and your spouse get divorced, there is likely no question that the home you owned before your marriage will be considered separate property owned by you. However, consider the payments made on the mortgage, improvements on the house, and general upkeep. All those improvements in mortgage payments likely take money to do. If that money comes from income earned during your marriage, your spouse may make reimbursement payments out of your separate estate for benefits made to your individual property.
Again, we can see the equity in this. It was your home but your community income that was utilized to benefit the house. While ownership does not transfer in a situation like this, it puts you in a position where it would make sense to allow reimbursement. After all, the money spent improving the house and paying the mortgage was just as much your spouse is as it is yours. As a result, Texas recognizes concepts of reimbursement in situations like this. The degree to which reimbursement is necessary and how that reimbursement will be calculated depends on many factors that you can work with your family law attorney on. Otherwise, you should expect to have reimbursement costs like this be factored into your divorce in one way or another.
Separate property and its impacts on the division of the community estate
individual property that you own and different property that your spouse owns will impact your case in several ways. Let’s consider how a court would view your personal property and divide your community estate. All things being equal, a family court judge would look too, but the quality of your financial circumstances when deciding how to divide your community estate. For instance, one of the factors that the judge would look to is how much separate property each of you stands to retain.
The more you own, the less likely a judge is to consider this an essential factor when dividing your community regarding the separately owned property. Let’s consider an example where you held a great deal of property before your marriage. You may have grown up with a great deal of wealth or got married later in life and had a more significant opportunity to collect parcels such as homes, retirement savings, and things of that nature. As a result, you came into your marriage with more property that cannot be divided up in the divorce. With that being said, the less reliant you are up on the property to be divided out of your community estate, the more likely it is that a judge would consider other factors when dividing the Community property up between you and your spouse.
The reason for this is that you are not as reliant upon the Community property to survive after a divorce as other people would be with less in the way of separate property to fall back on. Consider if you had a great deal of individual property while your spouse had very little. It would make sense for a family court judge to award your spouse more of the community estate, all things being equal, due to this massive gap in your separate estate values. Your spouse could utilize the extra money from the community estate to sustain themselves after the divorce, go back and completed a degree, or do anything else they need to get their feet underneath them after your divorce. You could use whatever portion of the community estate you are awarded plus your more significant separate estate to do the same thing.
Otherwise, a family court judge would look to factors like your age, health, educational background, history of earnings and income, prospects for growing your income, and a host of other factors when dividing up their community estate. To be sure, separate property is a factor that a family court judge would consider when dividing up your community estate, but it is not the only factor. However, this highlights the importance of your ability to organize, inventory, and appraise your community and separate estates so that a judge has an accurate picture with which they can make decisions in a trial scenario. You do not want your judge making decisions based on inaccurate information or limited information on your spouse in Ventura alone. Instead, you need to put in the work, time, and effort to perform your inventory and appraisement and submit it to the court early in your case.
Prenuptial and marital property agreements and their impact on separate property
An exciting aspect of separate property that we have not discussed today is the impact of premarital and marital property agreements on your different estate and that of your spouse. We have already spent a fair bit of time in today’s blog posts discussing what particular property is and what individual property is not. We know that it is likely that the vast majority of your property that you own will be Community property at the time of your divorce if your marriage has lasted for an extended period. We also know that separate property cannot be divided in a Texas divorce. However, what we have not discussed is your spouse’s ability to sidestep the traditional laws on Community property division to create outcomes that are preferable to the two of you.
After all, while a family court judge will do their best to divide property for you and your spouse in an equitable fashion, that does not mean that they will ever get to know you and your family, as well as your junior spouse, do. You may be asking yourself how you and your spouse could agree on anything during a divorce if you are upset with one another or generally not in agreement on many topics. That is where I can tell you the benefit of marital and premarital property agreements come into play.
A premarital property agreement seeks to define what property, assets, and debts will be part of your community estate or each of your separate estates at the time of death or divorce. Premarital property agreements are more commonly referred to as prenuptial agreements or simply prenups. There are many circumstances in which you may benefit from having a prenuptial property agreement. Indeed, these documents receive a fair bit of attention when it comes to celebrities and their marriages. However, premarital property agreements can be worthwhile for regular people like us, as well.
Consider a situation where you entered into your marriage with a lot of viability, and debt was taken out to support your business. You and your fiance may have concerns that these loans could be determined to be Community property by a family court judge in a divorce scenario. To avoid any misconceptions about the nature of these loans, you all could agree in advance that these loans would remain your separate responsibility no matter what else happens in a divorce. This way, your spouse could be protected, and you would stay the responsible party for these dads.
Additionally, a marital property agreement would function in much the same way as a premarital property agreement. The significant difference is that you would come to this agreement with your spouse during your marriage. Many things are associated with money, but you can outline them in a marital or premarital property agreement. Subjects like alimony can be covered in a premarital or marital property agreement, but topics like child support cannot be predetermined. This is because you all cannot anticipate the needs of your children in advance. new
Finally, a premarital property agreement or marital property agreement functions a lot like a will in that it has no impact or no legal authority until death or divorce comes into play in your marriage period so, if you and your spouse live for many years as happily married people the property agreement would have no impact on anything until one of you were to pass away. However, should you enter into divorce proceedings, the marital property agreement or premarital property agreement would be attached to your petition for divorce as well as your final decree of divorce as exhibits? That way, the family court judge could rely upon those documents and understand that much of the property division aspects of your divorce have already been taken care of doing too, having signed these property agreements in advance.
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. Our licensed family law attorneys offer free of charge consultation six days a week in person, over the phone, and via video. These consultations are an excellent way for you to learn more about the world of Texas family law and how your family’s circumstances may be impacted by the filing of a divorce or child custody case.