Texas is a community property state and many people believe that means in a divorce each spouse gets an even half of everything, owned by both spouses, added together and divided down the middle. It is true that many marital assets are evenly divided, however there are more factors involved. The Texas Family Code defines community property as all property acquired during the marriage, other than separate property.[i] The property each spouse brings to a marriage, such as furnishings and personal items, is considered separate property. Additionally, separate property includes assets and items received by gift, through a will or an inheritance. An amount of money recovered in a personal injury lawsuit is also separate property.
There is a rebuttable presumption that all property in a marriage is community property.
The presumption in Texas law is that all the property owned by a married couple is community property, and subject to equal division. The individual, who claims that certain assets are separate property, has the burden of proving that the asset was owned before the marriage or otherwise is separate property as defined by Texas law. Separate property can become community property through the commingling of assets. An example of commingled property is a gift of money that is spent by the recipient spouse on home repairs or an investment, and once the money is spent, it is no longer traceable or identifiable, as it becomes part of the value of the home or investment. To preserve the separate nature of property, it is best to keep that property separate from the marriage, in a separate financial account with documentation of the source of funds, for example.
Gifts are usually considered a good thing, but they can also lead to contested litigation.
Money given within a family, unless it is documented, can be the subject of disagreements and litigation during a divorce. The issue is whether the money was given to one spouse or was intended for the benefit of both. Texas law includes a presumption that money given by a mother to a son, for example, is intended for the benefit of the son as part of the natural parent-child relationship. This presumption, however, is rebuttable and the party in a divorce can challenge the presumption and present evidence supporting a claim regarding the intended beneficiary of a gift.
Using the example of the gift of money from mother to son, if the money is used by the son to make a purchase that both spouses equally use, such as hot tub, it may be considered mixed property. Mixed property is another classification that is a blend of separate and community property.
Once property is classified, the community property can be divided and allocated.
Property distribution and settlement among spouses can involve a calculation of the value of separate property and a credit toward each. After the separate property is identified, the marital property can be divided. The division may be an equal split down the middle or it can be increased or decreased based on a variety of factors included in the Texas Family Code chapter on property division.
Judges can determine which spouse receives what items of property and the division of cash assets, however, most attorneys can advise their clients on what the judge is likely to do, and urge the parties to compromise and settle their claims to property by agreement and save time and resources they would otherwise spend at hearing and trial on property division.
In many cases, the classification of property is addressed in a pre-marital agreement.
While some young couples barely have enough money to take their honeymoon, others come to a marriage with significant assets they wish to protect and keep separate. A pre-marital agreement, entered into by both parties, can identify assets, name their source and classification as separate property, for example. If however, the parties commingle the separate property, the pre-marital agreement may not be effective in a divorce and property division. Attorneys who work with clients seeking pre-marital agreements have the opportunity to advise the client about not commingling or mixing separate property to the extent it would lose its classification.
Many marriages end up in divorce over impassable disagreements among spouses over money and property. Even the threat of filing for divorce could turn a comment about “who gets what” can lead to the set of circumstances where the spouses end up in divorce and property division. Knowing how Texas law generally applies to property in a marriage is important for anyone interested in getting married, as well as for those who are married and considering divorce.
The Barrows Firm represents spouses in divorce with a variety of complex financial and matters.
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[i] Texas Family Code, Chapter 3, General Rules for Separate and Community Property.