If you entered into your marriage with a significant amount of property, then a divorce scenario can put you in a precarious position. Since Texas is a community property state, and there is a presumption that all property owned at the time of your divorce is community property, there is a risk that your separate property could be lumped into the community property in the state and thus become eligible for division in the divorce. If you own a substantial amount of assets or property that should be yours after the divorce, this may be your concern as you consider filing a divorce case.
From the perspective of a family law attorney, you, as a potential family law case participant, must understand not only how to protect your separate property assets in a divorce but how community property works in Texas. We could spend a relatively short time discussing how to protect separate property from the division process in a divorce, but that wouldn't do you all much good. We need to go through the basics of community property law in Texas so you can learn as much as possible about the foundations of property division in our state. From there, you will be better equipped to make decisions and to plan out your property division in a divorce.
Community property in Texas
Texas is a community property state. This means that our form adheres to principles regarding community property when dividing up the marital estate in a divorce. How does community property differ from theories of property division based on the common law? In most states in the US, our common law states when it comes to dividing up property. Where Texas differs from most of these states will be the key to understanding how your property may or may not be impacted at the time of divorce.
Community property does not draw a distinction between property acquired during a marriage based on whose income was utilized to purchase the property or whose name appears on the title or other ownership documents for the property. Instead, community property states like Texas presume that all property owned by you and your spouse at the time of your divorce is owned just as much by you as by your spouse. It does not matter whose income was used to purchase the property, and it does not matter whose name appears on the ownership documents.
Let's walk through a couple of examples to illustrate these points better. Suppose you are a stay-at-home parent and have never worked outside of the house during your 20-year marriage. Your husband has worked outside of the house and has earned every dollar of income that has been accumulated during your wedding. That income has allowed you all to purchase a home and all of the property inside of that home.
Late last week, you were caught off guard by your spouse filing for divorce against you. Seemingly out of the blue, you were approached by a process server with divorce paperwork showing that a divorce case was pending against you in Harris County. With little in the way of knowledge about divorce or the law, you are asking questions about Community property and how it is divided in your divorce. this is what you need to know When it comes to how your home and its property will be divided.
First of all, since your home was purchased during your marriage and the money that went towards its purchase was also earned during your wedding by your husband, the house itself is considered community property. There is no distinction drawn between his income and your lack of income. Instead, since the income earned came from your spouse's primary place of employment and occurred during your marriage, that income is also considered community property.
Since community property income was utilized to purchase a home during your marriage, it would follow that the house itself is community property. It does not matter if you contributed nothing in the way of income or money towards its purchase. It does not matter if the home loan used to pay for much of the house was not in your name. It does not matter if your name does not appear on the title to the home, either. Texas community property law looks to the date on which the home was purchased and the money used to buy the home. Given the above circumstances, this house would be classified as your Community property.
The house is not 50% yours and 50% your spouses. Instead, each of you has an undivided complete interest in the home. It will be subject to division in the divorce based on the specific circumstances of your case. You do not need to be concerned that the home does not have your name on the title or that you did not earn the income used to pay the mortgage. All that matters is that the house's income is considered community property and is thus eligible for division in your divorce.
What about a separate property?
When we discuss community property with a Texas divorce, we must also examine the separate property. Separate property is any property owned by you or your spouse before your marriage. In the alternative, the individual property could also have been acquired during your wedding if you were gifted property or an asset precisely to you or your inherited property. There are a few other exceptions to the basic rule about Community property and separate property, but these are the two that I would recommend you keep in mind.
Let's suppose that you came into your marriage with a great deal of property and assets. Rather than being in a position to get married in your early 20s, you ultimately got married in your early 30s after nearly a decade of working and saving money. As a result, you came into your marriage with a house that you turned into a rental property once you moved into a marital home. In addition, you have a great deal of personal property, including jewelry, a vehicle, and artwork that you owned before the time you got married. Do you need to ask yourself how well these pieces of property be classified in a Texas divorce?
Property that you owned before your marriage will be classified as separate property in your divorce. This means that you may have to present evidence to show that the property is your individual property but should not have any issue with it being divided up in your divorce. Suppose you are challenged about whether or not the property belongs in a community or separate estate columns. In that case, you may have to present evidence to prove your contention that property is owned separately, but in general, the property is safely yours after the divorce.
The next step in our analysis for today's blog post will be to discuss how to prepare for the property division phase of your divorce. this is a critical juncture of your case that will see your community property divided and your separate property classified as being unable to be divided in the divorce. Typically, the more prepared you are for dividing up property in the divorce, the better and more efficient the results of your case will be.
Preparing for property division in a divorce
Once you have identified all of the property that belongs to you separately, to your spouse, or each view as Community property, it is your job to organize these pieces of property and debts along those lines. This does not have to be fancy and can be done simply by drawing two lines from the top of a piece of paper down to the bottom. Using these three columns, you can place property into each column according to whether or not it belongs as part of either of your separate Estates or as part of the community estate.
This simple exercise can help you sort through all the property you own and help your spouse determine how you view the situation with your parcel and debts. For the most part, you should expect your spouse to agree with you on what estate particular pieces of property belongs in. A relatively simple property setup for most marriages means that division and divorce will not be overly complex. However, it can mean that there are some disagreements on the nature of certain pieces of property.
Another way that spouses prepare for the final stages of property division is to request discovery responses from one another. Discovery is a process whereby you submit questions and requests for information from your spouse, and they do the same with you. From there, each of you will turn over documents, information and will respond to questions that help one another get an idea of the positions and property status for each of you. You will be better prepared to negotiate in mediation as a result of submitting discovery responses. You will be prepared better for a trial should you not be able to agree on how to divide up your community property.
When it comes to separate property specifically, I recommend that you prepare any ownership documents to evidence the asset's different property nature. Title documents two vehicles or homes, receipts with dates on them showing when a particular piece of property was purchased, wiring information from bank accounts showing what source of funds were used to buy a specific amount of property, and things of this nature or what I am talking about. The more detailed and precise the documentation shows your asset's separate property nature, the better off you will be.
Concerning retirement and investment accounts, you will need to develop a plan to show what portion of each report is community property and which portion is separate property, if any. I envision a situation where you have a 401K through your employer, which had money added to it before your marriage. While much of the 401K is community property, some of it may be your separate property. You will want to determine the proportion and whether it is worth the time and effort to fight over a relatively small portion that may be part of your separate estate.
The last thing I will mention regarding separate in community property is that, while the state of Texas has its laws on community and individual property that a judge will honor in a trial, you and your spouse are free to bypass those laws if you choose to in negotiations. As long as what you decide to do, as far as determining what property is a community and one property is separate, is not unconscionable in terms of its unfairness, a judge is likely to honor your agreement. Your willingness and ability to work with your spouse on dividing property up like this will be a significant determining factor in how well you can complete the property division phase of your divorce.
Questions about the material presented in today's blog post? Contact the Law Office of Bryan Fagan
If you have any questions about the material presented 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 complications six days a week in person, over the phone, and via video. These consultations are an excellent way for you to learn more about Texas family law and for our attorneys to discuss the services our firm provides to our clients.