When I'm meeting with a person in our community during a free of charge consultation offered by the Law Office of Bryan Fagan, PLLC, I do my best to notice trends in questions that are asked of me. I try to identify trends because I will not overthink a question if one person asks me a question. When two, three, four, or five people ask me a similar question over a short period, I start to think that this is probably a very relevant question.
When I provide an answer to the person who asks me the question, I do that person a lot of good (I hope), but I wish that I could broadcast that answer to the other folks out there who find themselves in a similar position. The "hot" topic at the moment seems to be any question related to marriage and money. Property, assets, money, income, and debt. These are words that are used in a lot of these consultations. Are these topics that are of interest to you as well?
You don't even need to consider or want a divorce necessarily to ask these questions. Many of the persons who come in to talk to us don't want a divorce (at least now). Some want to know where the law stands regarding a critical issue and their family. Our attorneys are happy to answer these questions objectively without inducing or encouraging them to file a divorce.
With that said, I would like to spend today's blog post discussing the topic of money and marriage. You can be in a marriage where you and your spouse have a great deal of wealth, or you could find yourselves on the other end of the spectrum with very little in the way of wealth and much more in the form of questions and uncertainty. I think the content in today's blog post will help you understand more about the relationship between money and your marriage and how to protect yourself and your future should a divorce, unfortunately, be on the horizon.
How is property broken down in a marriage between jointly held and separately held property?
Texas is one of the relatively few states in the United States, a Community Property state. This means that all property owned between you and your spouse at the time of your divorce or the death of one of the spouses is presumed to be owned by both you and your spouse. This is what is known as community property. The other type of property is known as Separate Property. Separate property is property owned by either you or your spouse, different from one another. This could be property owned outright before your marriage or property acquired by gift to one of you or through a will.
The income you and your spouse earned during your marriage is more than likely community property. This is true whether you are the spouse who is the primary breadwinner in the household or if you are a stay-at-home parent or spouse who has never worked outside the home a day in your life. It does not matter if you deposit your paychecks into a bank account your spouse has no access to. This money is community property regardless of whether it ever comes into contact or is intermingled with your spouse's income.
The purchase of a house or business during your marriage means that the home or business is likely to be considered community property as well. This is especially true if the home or business was purchased with community property income. If the home or business was purchased with separate property funds (say you inherited $250,000 from an uncle after he passed away), you had better have the paperwork to trace the individual property income used to make the purchase.
When the separate property becomes community property
One important lesson to learn from today's blog post is that separate property can become community property if it is commingled with community property. Let's take an example that could relate to your situation. Suppose that you owned a commercial building where you leased out office and retail space to businesses who paid you rent. You began your ownership of this building before your marriage to your spouse. However, once you and your spouse got married, you began to deposit these rent checks into a jointly held checking account that contained marital income earned by you and your spouse.
This situation would likely result in the rent money becoming community property because you had mixed it up with community income in your jointly held bank account. The building itself would likely remain your separate property, however. An issue can be made if you amend the title to the building from your name to both your and your spouse's names.
Another exciting situation could develop if your spouse put a great deal of time and money into your building, improving it and attempting to locate businesses to lease space in the building. Suppose this was the case and you and your spouse were to get a divorce. In that case, a judge may declare the building to be a part of the community estate, or in the alternative, may decide that your spouse is entitled to at least a reimbursement of the community funds utilized to improve the building.
Types of co-owned property in Texas
In Texas, you and your spouse automatically own any property purchased with community income during your marriage. Any income earned and ownership rights to the property are shared equally. It does not matter if you supplied all of the income used to purchase the property and your spouse supplied none. This may be self-evident to an extent, but I wanted to make this crystal clear before we go any further.
Debts and taxes- not so fun, but essential to your marriage
Unfortunately, if you pay attention to the news, you probably have come to learn that we as Americans love debt. It doesn't appear that there is a lender out there that we don't want to take a loan from. Whatever this is, I have recently received several questions about debt. We will discuss this topic in greater detail tomorrow, but I wanted to introduce the issue today and talk about one question that I have received several times of late.
Are you responsible for the debts of your spouse?
Worried spouses have recently asked me whether or not they are responsible for their spouse's debts that they have not seen any direct benefit from. The answer that I would give to you or anybody else who asked me this question would depend on whether you co-signed the loan.
Let's assume that you and your spouse applied for a credit card together and signed the application where you promise to pay the amount charged on the card in full or risk paying interest on the remaining debt. In this situation, both of you would be responsible for the debt, even if it was your spouse who utilized the card for 100% of the transactions that appeared on any given bill. You could have glared at your spouse each time the card was used and cursed at him; on top of that, it would not matter. The same general principle applies to a home purchased where you and your spouse's names appear on the mortgage. You could end up responsible for a home loan on a home that you don't even live in anymore!
More on debts, taxes, and marriage in tomorrow's blog post
Please head back to the blog for the Law Office of Bryan Fagan, PLLC, tomorrow to read more about marriage, debts, and taxes and how each topic is related to the other. In the meantime, please do not hesitate to contact the Law Office of Bryan Fagan, PLLC, if you have any questions about today's subject matter or anything having to do with Texas family law.