When you and your spouse lived in Texas you all had an equal and undivided ownership interest in community property. Once you and your spouse get divorced the state of Texas would have determined how your community estate would be divided up. Any property that was originally community property, no matter whose name or combination of names the property is titled in, is still owned in equal and undivided shares after you and/or your spouse move from Texas.
However, the same is not true of your ability to manage the property or the liability you are exposed to due to ownership of the property. This occurs if you were to move from Texas to a common law property state or even if you were to move from Texas to another community property state. To sum it all up, you and your spouse would own any property in the same way you owned it in Texas- even if you move. However, everything else in relation to the property changes as soon as you decide to move.
How is real property handled in situations when you move from Texas to another state?
If you owned a parcel of land that was community property in Texas and was in your name only, once you move to another state your spouse will still own the same undivided, one-half interest in the land that we discussed in the prior paragraphs of today’s blog post. This is true despite the fact that the title is in only your name. The question that we would now need to ask ourselves is does the new state where you moved get to apply its state laws regarding liability on that parcel of land located in Texas?
In the event that you and your spouse were to get a divorce later on, you all need to seriously look into whether or not the new state is able to divide the property using its own laws or if it will defer to the laws of Texas. This is something that can impact your divorce in a significant fashion. While this type of circumstance alone should not determine whether or not you move, it should be a part of any decision making you utilize in order to determine whether or not the move is in your best interests.
Some hypothetical examples to run through
Let’s say that your mother is planning on gifting you a significant amount of money. Your intent is to keep that money separate from your spouse. It’s not that you don’t trust him, but your mother’s intent was to gift the money 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 in a divorce situation that gift from mom is clearly your separate property?
You would want to keep your separate property as 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 to never allow any portion of the gift from mom to go into a shared account. You can even designate the account 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 that was made to open an account and deposit the money. If your mother can document the transfer of the money into your account that will be even better. It will go to show that you were working in combination with your mother to ensure that the money she gifted you is clearly marked as being separate property. In the event that 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
Since you live in Texas, you need to be aware that income earned from separate property during the course of your marriage is considered to be community property. Any interest that you earn on the gift made by your mother to you should be deposited into a different account that is in your name only. Doing so will avoid the possibility that you will inadvertently commingle community and separate property funds in your separate account. Commingled property is community property.
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. Any investment that you are gifted, which has been purchased with money from your separate account should be held in your name only. If your mother were to gift you a tract of land should be done so clearly to you. Work with your mother to ensure that her intent to gift it to you as separate property is clearly made 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 in relation to a divorce?
If you were to purchase land during the course of your marriage in Texas it would be presumed to be community property. On the other hand, real property that is purchased in Texas with money earned by you and your spouse earned in a common law property state would be considered to be separate property. This is due to the fact that Texas law treats income earned out of state as not being part of the community estate.
Whether or not title is held in your name or in the name of you and your spouse does not matter especially. The reality is that the property is not going to be found to be community property in all likelihood. The land itself has nothing to do with it. Again, the property was not purchased with community income. If title to the property is held in your name alone you need to be aware of what can occur in a divorce if your spouse’s income contributed to the purchase of the land.
Moving to Texas from another state
If you and your spouse have moved in recent years to Texas, then the law of our state would be controlling over any property rights related to your marriage. It doesn’t matter if you were married for thirty years in Kansas and have only lived in Texas for three years. Any personal property that you acquired while living in Kansas may end up keeping its original status that was held in that state. Real property would be treated the same way.
Once you and your spouse have established residence in Texas both you and your spouse’s personal property that was acquired while in Kansas would remain as part of each of your separate estates. This assumes that the community property presumption that attached as soon as you established residency in Texas can be put aside with evidence demonstrating the separate nature of the property.
So long as ownership of the asset in question can be established through evidence as being either of your separate properties, it will be treated that way in a Texas divorce. The more time goes on, however, the ability for you 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 acquisition 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. Now I would like to apply the law to some hypothetical situations so you can see how the law relates to you and your family, potentially.
New house purchased, spouses divorce
You and your spouse got married four years ago and subsequently purchased a home together. You put together a down payment that was made up of money that each of you pulled from a checking account that both of you had prior to the start of your marriage. After you got married, neither of you contributed any monies to these accounts. All dollars put into the house are “pre-marriage” dollars from both of you. Additionally, you added approximately $10,000 from a joint checking account that was opened after you got married. All of your paychecks have been deposited into that checking account since you were first married.
You and your spouse also took out a mortgage totaling $100,000 from a bank in your hometown in order to pay for the remaining balance on the purchase price of the home. You all worked hard to pay off the mortgage very quickly. The lien was released on the home subsequently. The home’s value is right at $300,000 currently. The question we need to ask ourselves is whether the house is either of your separate property or is a part of the community estate?
I think that a court in Texas would likely rule that it is partially your separate property, partially your spouse’s separate property and part of the community estate as well. Whatever small amount of money you each put in from your separate property bank accounts would be calculated against the larger portion that would be included as community property (the mortgage loan as well as the down payment from the community held bank account).
Vacation home purchased
During the course of your marriage, you decide to buy a vacation home in Galveston. $10,000 as part of the down payment came from a gift to you from your grandfather. $90,000 was borrowed from a bank. The purchase price for the house was an even $100,000. You were the only person to sign the note for the house. As security for the note, 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 the $90,000 you needed to pay off the note in full (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 home would fall into your community estate. The money was loaned to you during the course of your marriage. The loan is presumed to be community property as a result- even if your spouse never signed any of the loan paperwork making him 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.
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 being able to serve our community by providing effective and strong advocates in the family courts of southeast Texas. Thank you for your time and consideration.