Put yourself in the following situation. After a long battle with cancer, your grandmother passed away at the age of 85. She lived a long life, true, but it was a heartbreaking thing to see happen to her and your family. Grandma was the matriarch of the family and all the events during the year- birthdays, Thanksgiving, Christmas- seemed to revolve around her house. Grandpa died a few years ago but that didn’t stop Grandma from hosting all these events with the same vigor and excitement that she had for all the years he was alive.
Thankfully, Grandma died with a will. A will is the single most important estate planning document that every adult should have in their end-of-life toolbox. Grandma may have been in her mid-eighties when she died but she understood the importance of good estate planning. While we’re at it- if you have questions about a will, why a will is important, or estate planning generally then please reach out to the Law Office of Bryan Fagan today. Lead estate planning attorney Megone Trewick would be more than happy to take your call, set up a free-of-charge consultation with you, and help you to better understand estate planning in Texas.
Now, then, back to our regularly scheduled family law programming. Without a doubt, Grandma was a person who was cherished within your family. Words can’t describe how much she meant and still means to you, your siblings, your parents, and your extended family. Her impact on you all will be felt for decades and into the future. We all have that special person in our lives who made an oversized impact on who we are and where we are headed. For you, Grandma was that person.
Grandma must have felt the same way about you because within her will she left you a substantial amount of money- to the tune of $100,000. Simple as that, when she passed away the executor of her will was instructed to cut you a check for $100,000. When you inherited this money you and your wife had been married for ten years. It was clear where the money was coming from and what the circumstances of the inheritance were. Nobody would question that.
However, that all seemed to change about two weeks ago when your wife filed for divorce. The $100,000 inherited from Grandma is at the center of the property division discussion that you have been holding with her in informal settlement negotiations. She would like to receive a chunk of that inheritance as a parting gift of sorts. As she walks out the door, she believes the $100,000 is in play for her as a potential property asset. Or at least she believes that a portion of the award should be subject to division in the divorce.
You’ve asked her several times what she is basing this on. She won’t go any further with an explanation but continues to insist that she receive at least a portion of that money in the property division. What you need an answer to is whether that should happen in your divorce. Are inheritances subject to division in a Texas divorce? You aren’t sure. You’ve run across some articles online but can’t seem to get a straight answer.
That’s why you’ve come to the Law Office of Bryan Fagan. You know that you can trust our office when it comes to providing you with up-to-date, accurate, and honest information about the world of Texas family law. You schedule a free-of-charge consultation with one of our experienced family law attorneys and sit down for a chat, hoping to learn as much as you can about this inheritance and whether your wife is correct that she has a valid claim to this inheritance. Let’s pick up there and see what our attorneys have to say on the matter, shall we?
How is property divided in a Texas divorce?
Before we can get into the nitty-gritty of how an inheritance is treated in Texas divorce cases, you need to know the method a family court would utilize in Texas as far as how property in a marriage is divided upon divorce. Texas is a community property state. Community property theories of property division revolve around equitable distribution of your marital property and debts.
What does this mean for you? Take all the property and debt that you own at the time of your divorce. Now take all the property and debt your spouse owns at the time of your divorce. It will be presumed that all this property is community property. Community property is subject to division in a divorce. The bottom line is that you start off your divorce with every piece of property and every debt in your life subject to be divided by a family court judge.
Let that sink in for a second. This means that even that inheritance, wherever you deposited it, is subject to division based on what is known as the community property presumption. However, now is when we can take a step back and exhale. That presumption can be overcome with sufficient evidence. What is known as clear and convincing evidence is necessary to overcome the community property presumption that is a part of a Texas divorce. This is not impossible to accomplish but it means that the evidence that you would plan on presenting in a divorce trial would need to be substantial.
To summarize, there are three different categories of property between you and your spouse at the time of your divorce: 1) your separate property 2) your spouse’s separate property 3) both of your community property. Separate property is property owned by you before your divorce or acquired by either of you during the divorce by gift, inheritance, or via a will. Certain types of personal injury settlements and judgments are also classified as separate property. However, for today’s blog post, we will be focusing on the inheritance aspect of community property division.
Who will divide the property in your divorce?
Now that we know more about how property will be divided in your divorce, the next logical question that we should ask ourselves is who will be doing the dividing. The prevailing thought most people have at the beginning of a divorce is that the family court judge will be charged with dividing your community property. This makes sense given how often we see judges on television presiding over divorce trials and things of this nature. Each of us can probably think of a movie or two where a divorce trial was at least a prominent scene in the movie if not the most pivotal scene.
This belief is not true, thankfully. Leaving it up to a family court judge to divide the property in your life is not a good setup. For one, a family court judge will only have a limited amount of time to learn important information about your case. Even if you and your spouse are not on the best of terms now, nobody knows your relationship and your family better than the two of you. If you two can put your heads together and set aside your differences for as long as that takes you are better off doing so than leaving it up to a judge.
You and your spouse will be given ample opportunities to divide your community property. The separate property must first be divided from the community property to do so. If you and your spouse can agree right off the bat on what property belongs in your community estate and which assets are a part of your separate estates, then yours will be a much simpler divorce. Unfortunately, it is not likely that you two will agree on all subjects related to property characterization, not to mention property division.
How could your inheritance become a sticking point in the property division for your divorce?
You may be wondering how an inheritance could be a debated aspect of your property division in the divorce. After all didn’t we just cover that an inheritance is specifically listed in the family code as being part of a person’s separate estate even if it was inherited during your marriage? It should be an open-and-shut situation, right?
Not quite. Just when you think property division is straightforward, it comes to the specific circumstances of your case make things more difficult than initially met the eye. For one, your spouse could just be obstinate and force you to prove that the inheritance was what you say it was. She may know good and well that you received that $100,000 from your grandmother via her will. However, she may force you to prove the separate property nature of the inherited money.
To do this, you should hope that you have done a good job of record and document keeping. These documents will be the central focus of the case as far as presenting evidence to a judge that the inheritance is what you say it is. Clear and convincing evidence is not a low legal threshold as far as evidentiary standards are concerned. You need to have your ducks in a row if you are pushed to prove that this money is your separate property. If this isn’t a good enough reason to hire an experienced family law attorney with the Law Office of Bryan Fagan, I don’t know what is.
For instance, you likely received some sort of correspondence from the attorney, law firm, or executor when you received the property. Offering this into evidence would be a good start as far as proving that the money was inherited and not acquired some other way. Looking through bank statements, old documents, text messages, emails, social media posts and so much more could be an important part of determining how you are going to prove that the money in question is part of your separate estate rather than community property.
Commingling of the money in an account with your community property is another way that the money could be lost to your separate estate. Suppose that you deposited the money into an account that contained community property income within it. The bank account where you and your spouse deposit your paychecks from work is a good example. Thinking nothing of it at the time, you deposit the money into this account and go along your merry way.
What happens over time is that you know that you deposited $100,000 in the account but since that time you have deposited even more money in and taken more money out. After a while, it becomes difficult to tell what $100,000 looks like anywhere with so much going into and out of the account. In retrospect, you should have deposited that money into a separate bank account that never had any additional money go into or out of it. That was not what you did, however. You did something reasonable considering the information available to you at that time.
This is how conflict can arise when it comes to a seemingly straightforward issue like whether an inherited sum of money counts as separate or community property. Looks can be deceiving when it comes to community property division in a Texas divorce. You should prepare for the unexpected by always documenting the steps you take with large sums of money. Even if you do not believe that anything will ever come of this money or that it will ever be an issue again you should keep track of all investments and decisions you make with money like this.
Closing thoughts on inheritances, community property, and divorce in Texas
What did we learn today? For starters, Texas is a community property state. Income and property acquired during the divorce are likely to be classified as community property and will be subject to division in your divorce. There are some exceptions to this rule, however, and an inheritance just so happens to be a type of property that you can acquire during your marriage which would still be counted among your separate estate.
However, as we also saw in today’s blog post, there can be circumstances that arise that can complicate this arrangement. For one, if you deposit separate property into a bank account that has community property already within it then you are about to encounter a situation which is known as commingling. This means that because it was deposited among community property, the separate property asset will be hard to distinguish as such.
Evidence would need to be produced where you can show a court, or your spouse in negotiations, that the property is what you say that it is. With a lot of money at stake, expect that your spouse will pull out all the stops to make you prove that this money is your separate property. If you are a good record keeper then you may be ok. If you struggle to keep track of your financial dealings and history, then you may be in some trouble.
Again, hiring an experienced family law attorney is a great step that you can take to protect an inheritance from a spouse who has dollar signs in their eyes. Remember that Grandma’s inheritance is about more than just money to you. However, for your spouse, that inheritance is purely about dollars and cents. To not take care of this money to the best of your ability would not only be a shame but it would tarnish to some degree the legacy left by your grandma.
In some situations, tracing becomes very important to your property division. Tracing involves the sometimes complex process of taking limited information and then using that limited information to determine the origins of money or property. Think of tracing like using breadcrumbs dropped along the hiking trail to find your back to a campsite. You may not know every route back to camp, but those breadcrumbs show you the most direct route back.
Tracing is not easy. It can require the use of an expert witness like a forensic accountant or another person who is similarly experienced. Finding this type of expert is a process. Working with an experienced attorney is a great way to ensure that you have these types of tools in your toolbox which you may need to win a case. In some situations, the $100,000 inheritance that we have been discussing in today’s blog post will be the most significant piece of property for you to consider. Taking advantage of the information available to you and being prepared for all the moving pieces of a case will be essential if you expect to achieve any of the goals that you have for yourself.
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 consultations 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 as well as how your family’s circumstances may be impacted by the filing of a divorce or child custody case.