When spouses divorce in Texas, the laws regarding community property come into effect. The laws are easy to follow for the most part despite what friends and family members who have gone through a divorce may have told you.
However, the key to understanding them is being taught about the ins and outs of the laws so that when you are asked in your divorce to negotiate over a specific item, you will have the information necessary to do so.
A key to understanding the laws of community property in Texas is to know that if you and your spouse can negotiate and settle the issues of your case before a trial, then the law has nothing to say about what you decide to do. Your agreements with your spouse can be much more flexible than what our state laws on this subject can provide for you and your family.
An example to begin today's blog post
Imagine that there exists a hypothetical entity that is known as the "community" that owns your and your spouse's assets. Both you and your spouse have a one-half interest in the community. Additionally.
Texas law has it that any property that is not considered community property either belongs to the separate estates of you and your spouse. When dividing up property upon your divorce, it is essential to know what a court will likely consider any given piece of property to be community or separate property.
Defining Separate and Community Property
Any property you owned before your marriage or property you acquired during your marriage by gift or inheritance is considered separate property. Suppose you have any income determined to be separate property and that income purchased property during the marriage. In that case, that property as well is considered to be separate property.
Community property is every other form of property. This is the definition. All property that is not separate is considered community property under Texas's laws. When we think of community property, things like salary, wages, commissions, and income generated off the community and separate property are all considered community property.
The Community Property Presumption
The law above that all property that is not separate is considered community property makes sense in the context of the community property presumption.
Before analyzing anything, the presumption in Texas is that all property owned by you and your spouse is community property. This means that any property that you and your spouse came into the marriage with individually and all property that you acquire during your marriage is assumed to be community property. Thus, to prove that any property is either separate or you or your spouse, you will need to refute and overcome this presumption with clear and convincing evidence.
A premarital agreement is a document that many spouses with a substantial amount of separate property entering into the marriage with may want to consider negotiating with their spouse-to-be. By negotiating with and agreeing with your fiancé on what will be considered separate property, you can avoid heated exchanges on this subject should you and your spouse decide to get a divorce.
At the same time, a premarital agreement can save the spouseless property potentially. Suppose you enter into the marriage with a substantial debt that could potentially be argued to be community debt. In that case, you can partition off this debt as your separate debt before the subject would even arise in your divorce.
The inception of Title as a means of classifying property
In your divorce, you will be required to determine whether a piece of property is either community or separate property. This is true even if your case never makes it to trial, and you and your spouse can negotiate upon a settlement beforehand. The inception of title rule is how Texas law determines whether a piece of property belongs in either the community estate or the separate estates of you or your spouse.
When the asset is acquired, a determination will be made as to whether or not the property is either separate or community property. Any events that occur after the Title comes into being will not affect how the property is designated.
For example, let's assume that you acquired a home with the obligation of paying a mortgage on that home. You were a single person when you purchased the home with the mortgage but decided a few years later you decided to get married.
The mortgage payments you made on that home would come from community income as all income earned during your marriage (from either your or your spouse's employer) is considered community property.
Despite the source of the funds used to pay the mortgage, the home itself is still considered your separate property under the laws of Texas.
If you and your wife ultimately decide to get a divorce, then your wife may end up having a reimbursement claim against your separate estate since community funds were used to pay the mortgage. This will not affect your ability to assert and prove that the home itself is your separate property.
What happens if you move to Texas from a non-community property State?
Most states in the United States are not community property states. If you have moved to Texas from one of the states that do not have community property laws on the books, then you will have to learn what, if any, property that used to be part of one estate now perhaps belongs in another estate.
I have another example of running by you that will hopefully illustrate this point for you a little better. Consider that you and your wife had lived the beginning years of your married life in Alabama. You and your wife owned mutual fund investments that were titled in your name only. Before moving to Texas, you and your wife sold your shares in the mutual funds for $50,000.
You and your spouse then used that $50,000 as a down payment on a home in the Houston area. The remaining portion of the sales price ($200,000) was put on a mortgage.
The key here to understand our overall discussion is that because the mutual funds were your separate property before selling them and using the profit for another purpose, the profit itself is still considered your separate property once you move to Texas. Based on the above hypothetical, the house would then be 20% of your separate property and 80% part of the community estate of you and your wife.
Speaking of homes, it does not matter whose name appears on the Title as far as ownership is concerned in your divorce.
The inception of title rule looks at the time and circumstances of acquiring whatever property is in question to determine whether the asset belongs in the community or separate estates of you or your spouse.
That means the new house you purchased during your marriage need not have your spouse's name on it to be considered community property. It can be titled just to you, but your spouse's rights in the property are the same as if her name appeared on the Title along with yours.
More on community property in tomorrow's blog post
The Law Office of Bryan Fagan, PLLC prides itself on educating and empowering our clients to make good decisions for themselves and their families in conjunction with whatever family law situation they face. To learn more about our office and to have your questions answered, please contact us today for a free of charge consultation.
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Other Articles you may be interested in:
- Family Law Cases in Texas: Marital Property and the community presumption
- Issues in Community Property Law in Texas
- Reimbursement of the Community Estate: Continuing the Discussion on Divorce
- Texas Divorce Overview: Dividing Community Property and Debts
- Dividing community property in mediation: What can be done to settle your divorce in Texas
- Individual Retirement Accounts (IRAs) and your Divorce: Taxes and General Information
- Social Security division in a Divorce
- Will Social Security Benefits play a substantial role in my Texas Divorce?
- Is Social Security Considered Separate Property in a Texas Divorce
- Critical Elements of a Divorce for persons over the age of 50
- 7 Tips for Divorcing After Age 50 in Texas
- Divorcing After Age 50 in Texas: What it Can Mean for You and Your Spouse
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