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In Texas, you and your spouse shared an equal and undivided interest in community property. Upon divorce, Texas community property division laws govern how your community estate is divided. Assets classified as community property remain jointly owned, ensuring equal shares for both spouses. This holds true even if one or both spouses relocate from Texas, regardless of how the property is titled or the ownership terms. Understanding these laws is crucial for ensuring a fair division of assets during your divorce.
However, the dynamics shift concerning property management and liability upon moving to a common law or another community property state. In essence, interstate property ownership retains the same joint ownership structure established in Texas. However, other aspects of property management and liability undergo alterations upon relocation.
How is real property handled in situations when you move from Texas to another state?
Suppose you owned a parcel of land that was community property in Texas and was in your name only once you moved to another state. In that case, your spouse will still hold the same undivided, one-half interest in the land that we discussed in the prior paragraphs of today’s blog post. This is true even though the title is in only your name. Does the new state where you moved to get to apply its state laws regarding liability on that parcel of land located in Texas?
If you and your spouse were to get a divorce, later on, you all need to seriously look into whether or not the new state can divide the property using its laws or if it will defer to the laws of Texas. This is something that can impact your divorce in a significant fashion. This type of circumstance alone should not determine whether or not you move. But it should be a part of any decision-making to determine whether or not the move is in your best interests.
Some hypothetical examples of running through
Let’s say that your mother is planning on gifting you a significant amount of money. You intend to keep that money separate from your spouse. It’s not that you don’t trust him, but your mother designed to gift the funds to you individually since it comes from the sale of a tract of land that had been in your family for some time. So, bearing in mind that the law in Texas presumes that income or property acquired during the marriage is community property, how can you work around this to ensure that a gift from mom is your separate property in a divorce situation?
You would want to keep your separate property separate from any community income/property owned by you and your spouse. To do so in this example, you can open up a bank account or investment account in your name only and never allow any portion of the gift from mom to go into a shared history. You can even designate the bill as being your separate account by naming it as such. You should only deposit that gifted amount into the account. Income from your job or any other funds/property should go into your shared bank account.
You should also keep accurate and complete records of the transaction made to open an account and deposit the money. If your mother can document the transfer of the funds into your account, that will be even better. It will demonstrate that you collaborated with your mother to designate the funds she gifted you as separate property. If your spouse attempts to argue that the gift is community property (and thus divisible in the divorce), you can fall back on your expert record-keeping to counter that argument.
Commingling is not your friend if you intend to preserve the separate property nature of a gift.
Living in Texas requires understanding the concept of interstate property ownership, particularly concerning income from separate property during marriage, which is classified as community property. It’s essential to deposit any interest earned on gifts from your mother into an account solely in your name to prevent inadvertently commingling community and separate property funds in your budget. Once funds are commingled, they become considered community property, which could complicate asset division in the event of divorce.
What should you do with funds or stocks purchased with money gifted to you?
Instead of a gift of cash, let’s assume now that your mother gifted you some stock for your thirtieth birthday. You should hold any investment received as a gift or purchased with funds from your separate account solely in your name. If your mother were to gift you a tract of land, it should be clearly conveyed to you. Please work with your mother to ensure that she intends to give you a separate property in the documentation that completes the transfer. Keep accurate records of any dealings in the gifting of property.
How does the state of Texas handle the purchase of land with a divorce?
If you buy land during your marriage in Texas, the law presumes it as community property. Conversely, if you and your spouse earn money in a common law property state and use it to purchase real property in Texas, it’s considered separate property. Texas law treats income earned out of state as not being part of the community estate.
The significance of the name in which the title is held, whether solely yours or jointly with your spouse, is minimal. In all likelihood, the property will not be considered community property. The land itself does not hold a decisive role. Furthermore, the property was not acquired using community income. If the title to the property is solely in your name, you must understand the implications in a divorce if your spouse’s income contributed to its purchase.
Moving to Texas from another state
If you and your spouse have relocated to Texas in recent years, the law of our state governs any property rights related to your marriage. This applies even if you were married for thirty years in Kansas and have only resided in Texas for three years. Personal property obtained while living in Kansas may maintain its original status from that state under the principles of interstate property ownership. The treatment of real property would parallel this course of action.
Once you and your spouse establish residence in Texas, personal property acquired while in Kansas would typically remain part of each of your separate estates. Exactly, the assumption relies on the premise that evidence showing the distinct nature of the property can supersede the community property presumption, which activates upon establishing residency in Texas.
In a Texas divorce, if evidence establishes ownership of the asset as belonging to either of you separately, it will be treated accordingly. The more time goes on; however, the ability to present sufficient and convincing evidence to a judge becomes more and more difficult. It is advisable to keep accurate and detailed records regarding any significant purchases or acquisitions of assets that you make.
Real-life examples of how these situations can work out
So far today, I have gone over the law and how it could apply to you and your circumstances. I would like to use the law in some hypothetical situations to see how the law relates to you and your family.
New house purchased, spouses divorce
Four years ago, you and your spouse married and acquired a home together. The down payment was assembled using funds withdrawn from a joint checking account established before your marriage. Since the wedding, neither of you has contributed any money to these accounts, and all funds invested in the house derive from “pre-marriage” dollars from both parties. Additionally, you added around $10,000 from a joint checking account opened after marriage to the down payment. Since the beginning of your marriage, all paychecks have been deposited into this joint checking account.
You and your spouse also took out a mortgage totaling $100,000 from a bank in your hometown to pay for the remaining balance on the home’s purchase price. You all worked hard to pay off the mortgage very quickly. The lien was released on the home subsequently. The home’s value is at $300,000 currently. We need to ask ourselves whether the house is either your separate property or part of the community estate.
In Texas, a court would likely rule that it partially constitutes your separate property, partly your spouse’s separate property, and part of the community estate as well. The calculation considers any small contributions from your individual property bank accounts against the larger portion designated as community property, including the mortgage loan and the down payment sourced from the community-held bank account.
Vacation home purchased
During your marriage, you choose to purchase a vacation home in Galveston. You receive a $10,000 gift from your grandfather, contributing to the down payment, while $90,000 is borrowed from a bank. The purchase price for the house was even $100,000. You were the only person to sign the note for the home. As security for the message, the bank put a lien on your vacation house.
As luck would have it, right after you closed on the vacation house, another relative came out of the woodwork to gift you $90,000. It’s the amount you needed to pay off the note in total (you’ve got a generous family!). The value of your home has now doubled to $200,000 from the original purchase price of $100,000. Is the vacation home your separate property or part of you and your spouse’s community estate?
10% of the home is your separate property since the gift from your grandfather was 10% of the purchase price. The remaining 90% of the house would fall into your community estate. If you obtained a loan during your marriage, the presumption is that it’s community property. This is regardless of whether your spouse signed any loan paperwork. This makes them liable on the note. You may be able to make a reimbursement claim for the $90,000 gift that went towards the satisfaction of the loan.
Conclusion
Navigating interstate property ownership after a divorce can be complex, especially when considering Texas community property division. While the joint ownership structure established in Texas remains intact across state lines, moving to a common law or another community property state introduces nuances in property management and liability. Understanding these intricacies is essential for individuals going through divorce proceedings or contemplating relocation. This knowledge helps ensure informed decision-making and protects your interests in the evolving landscape of property ownership.
Questions about community property and divorce in Texas? Contact the Law Office of Bryan Fagan
If you have any questions about the material that we covered today, 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 where we can answer your questions and address your concerns directly. Our attorneys and staff take a great deal of pride in serving our community by providing adequate and robust advocates in the family courts of southeast Texas. Thank you for your time and consideration.
Other Related Articles:
2. The details on community property division in Texas
3. Property Division & Taxes: The Basics
4. Dust Off Your Boots: A Texan’s Guide to Community Property Divorce
5. How is Community Property Divided in a Divorce in Texas?
6. What do you want to get out of settlement negotiations in your Texas divorce?
7. Property Settlement Guide: How Assets are Divided After Divorce
8. How to negotiate a divorce settlement with taxes in mind
9. Maximizing your share of the marital estate division in a Texas divorce
10. Navigating the Complexities of Divorce: Why You Need an Experienced Attorney
