Is Texas a Community Property State?
If you are facing a divorce in Texas, you may wonder, is Texas a community property state?
The answer is yes, Texas is a community property state in divorce. Therefore, if you’re facing a divorce, Texas community property laws provide that marital assets be divided pursuant to these laws.
A divorce represents an emotional, life-changing event in most people’s lives. However, it’s important to understand what is community property in Texas and understand your rights throughout the divorce process.
Consult with a qualified divorce attorney to carefully assess your property rights under Texas community property laws.
What is Texas Community Property?
Texas is a “community property” state. What this actually means can be more complicated than it sounds.
Basically, Texas community property (also referred to as marital property) refers to the identification of assets, debts and liabilities in the “community estate”.
In other words, those jointly owned by the husband and wife together.
What Is Defined as Community Property?
Community property is essentially any property in Texas that is not identified as separate. Generally speaking, all properties and earnings acquired during marriage are considered the joint property of both spouses.
Community property assets may include:
- Undeveloped real estate,
- Developed real estate,
- Other items of value received or earned during the marriage.
In addition to property and earnings, Texas Community estate liabilities also include debts or other obligations incurred during the marriage including:
- credit card debt,
- student loan debt,
- car notes,
- boat loans,
- home equity lines of credit,
- 401(k) loans,
- “payday” loans,
- other bank loans,
- other secured or unsecured financial obligations.
How Do You Prove Separate Property?
Texas community property laws dictate that if either spouse acquired property prior to marriage, the law considers that to be separate property.
Texas community property state laws state that if a spouse had sole ownership and management of property they purchased or received prior to marriage, then it may be identified as separate property. Sole ownership and management may be proven through the following:
- Recorded deeds,
- Purchase agreements,
- Transfer agreements, or
- Separate property agreements.
If a spouse maintains a separate property bank account throughout the marriage, a qualified community property attorney in Texas may assist in defining this as separate property.
However, if an asset was received by a spouse as a gift or inheritance during the marriage, that asset is presumed to be the separate property of the spouse who received the gift or inheritance.
Even though community property laws in Texas define inheritance, gifts, and some types of compensation from personal injury settlements as separate property, this designation may fail in some circumstances.
For example, if a spouse places their inheritance into a joint checking account that can be used and accessed by the other spouse, it may be classified as community property.
So for instance, if a wife received an inheritance, a gift, or compensation from a personal injury settlement and wants it to remain separate property, it’s important that she maintain that designation by keeping it separate from her husband and not commingle the funds with community property money.
Generally, any assets or liabilities obtained by a spouse before the marriage are that spouse’s separate property. A spouse’s separate property is generally not subject to division by a divorce court.
However, it can often become more complicated. For example, if either community property or one spouse’s separate property contributes to the maintenance, support or repairs of the other spouse’s separate property, a claim of reimbursement for those contributions may arise in some circumstances.
This is only one example of many possible marital property issues that often arise in divorce cases. As Houston Divorce attorneys, we will help you identify issues pertaining to community property and separate property in your divorce.
If you are concerned about protecting your rights in a complex Texas community property dispute, you should turn to an experienced Houston divorce lawyer at The Larson Law Office for guidance. Call us today at (713) 221-9088 for a free case review.
Community Property & Inheritance Overview
If you’ve received any assets through inheritance while married, you’ve probably wondered, Is inheritance considered marital property? Before answering that question, you need to know how Texas classifies different personal property.
Within the marital relationship, Texas separates the things you own into categories: separate property and community property. Separate property consists of
- Property owned by a spouse before marriage;
- Property acquired by a spouse during marriage as a “gift, devise, or descent”; and
- Compensation recovered by a spouse for personal injuries other than damages for loss of earning capacity.
Community property, on the other hand, consists of all property obtained by a spouse while married except separate property. In community property states like Texas, this means that all property obtained during a marriage by either spouse belongs equally to both spouses.
Is Inheritance Community Property in Texas?
Now, the big question: Is inheritance community property in Texas? As you may have figured out, the answer is no. Inheritance is a form of “gift, devise, or descent,” which Texas law classifies as separate property.
Accordingly, even if a spouse receives their inheritance while married, that inheritance remains the sole property of the inheriting spouse.
What Happens to Inheritance in a Divorce?
Because inheritance is separate property, it is generally not subject to division in a divorce. This is not always the case, however.
Mixing inheritance with other community property so as to blur the line between the two may result in that inheritance becoming community property. This commonly occurs when spouses commingle inheritance funds in a joint bank account, for example.
In general, whenever separate property becomes difficult or impossible to separate from community property, it becomes community property. As a result, keeping inheritance entirely apart from community property is important to maintaining the “separateness” of that property.
The spouse seeking to characterize property as separate property rather than community property generally has to prove it by “clear and convincing” evidence, which is more than “a preponderance of” the evidence.
Division of Texas Community Property in Divorce
Because TX is a community property state, upon divorce property is divided pursuant to community property laws in Texas. However, persons going through the divorce process under Texas community property laws may hold misconceptions about property division.
With community property, many people assume that during a divorce, a judge will automatically divide everything equally; each spouse will get half of the marital property whether or not they “deserved” it.
This may be a misconception, however, and Texas law actually divides property according to principles of fairness (or “equity”).
While a fair division may be a 50/50 split, that isn’t necessarily true. What kind of division is “fair” depends on the circumstances of the marriage. For example, a judge deciding on the division of property may consider each spouse’s contribution to the marriage, including:
- Whether one spouse cheated on the other or was otherwise “at fault” for breaking up the marriage;
- If one spouse has custody of any children in the marriage;
- Each spouse’s health, education, and earning capacity; and
- The responsibility each spouse takes on in the marriage.
Keep in mind, this is far from an exhaustive list. Because each divorce is different, these factors may not all be relevant from one divorce to another.
What Does Equitable Mean?
Texas is a community property state and provides for an equitable distribution of community property.
Many people presume that “equitable” means equal. However, an experienced divorce attorney should inform clients that a court may award an uneven distribution based on the spouses’ circumstances.
Therefore, the financial standing of each party often influences the division of the estate. For example, one spouse may be in a disadvantaged position based on the following criteria:
- Age and health,
- Vocational skills,
- Earning power, or
- Separate assets and liabilities.
Additionally, if one spouse provided for the other spouse as a caretaker throughout the marriage, this also influences an equitable division of property.
How Are Retirement Assets Divided?
The division of retirement assets represents a particularly complex area of community property division in Texas.
In these situations, many times you must draft a document referred to as a Qualified Domestic Relations Order or QDRO to effect a division of community property retirement accounts.
A QDRO is the primary instrument used to divide community property in Texas relative to retirement plans, 401(k)s, and pension plans.
What Is “Mixed” Property?
Mixed property refers to situations, for example, where married couples contribute separate property toward the purchase of community property or to reduce the other spouse’s separate property liabilities.
Many may believe the creation of this mixed property means any contributions may be lost. However, you may file a claim for reimbursement for these contributed funds under Texas community property state laws.
How Do Prenuptial Agreements Affect Community Property & Inheritance Community Property?
Parties sign a prenuptial agreement prior to marriage. This document serves as a contract between the two people about to marry. Typically, couples enter into a prenuptial agreement to establish the division of property before they get married.
In the event of divorce, prenuptial agreements control the division of property held by either party. And a postnuptial agreement behaves similarly to a prenuptial agreement. Couples often use prenuptial agreements when one spouse has much greater wealth than the other, but they are also useful for managing debt, real property, or other assets.
The major difference is when the spouses sign a postnuptial agreement. While the parties sign a prenuptial agreement prior to marriage, they sign a postnuptial agreement after their marriage has taken place.
In estate planning, a prenuptial agreement can be a powerful tool to control what your own children will inherit from you. Because community property belongs to both you and your spouse equally, you can only really ever give away half of the things you own in the marriage.
Absent an agreement between the parties such as a pre-nuptial agreement or post-nuptial agreement, all assets and liabilities obtained during the marriage are community property. With a prenuptial agreement, however, you have more control over the ownership of that property.
Facing Texas Community Property Division Issues in Houston?
At The Larson Law Office, our legal team is committed to giving our clients zealous and aggressive legal representation in working through their community property division issues.
Our divorce attorneys provide all clients with quality representation customized to their specific needs. We understand that the facts of your case are unique to your situation and treat each client accordingly.
The Larson Law Office never hands off casework to junior attorneys. If you hire Erik or Diana Larson, you speak to Erik or Diana Larson throughout your case. Whether in court, on the phone, in mediation, or via email—we personally address your concerns and answer all your questions.
For more information about your possible legal solutions, call our Houston divorce lawyers now at (713) 221-9088 or contact us online.