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Introduction
Texas is a community
property state. That means the property laws came from Mexico and Spain, and
are quite different from the laws in those states that were English colonies.
The law of property, in Texas, begins with 2 definitions.
In Texas, separate property is:
Property owned before the marriage; or,
Inherited property; or,
A gift; or,
A recovery for some personal injuries during the marriage; or,
Separate property that has changed
in form, but can still be identified as separate property.
In Texas, everything
else is community property. All property is presumed to be community property,
unless clear and convincing proof can show it to be one of the 5 items shown
above.
Importance of separate and community
A divorce court can
and will divide community property between spouses. A divorce court cannot give
husband's separate property to his wife (or vice versa). When a person dies, separate
property is given to different heirs than to whom community property is given.
Examples
The definitions sound simple enough, so let's see some
examples:
Engagement Ring
Is Susie’s engagement ring and wedding ring her separate property?
Yes, for two reasons. They were gifts. In addition, Susie owned them before the
marriage; before a preacher said “I pronounce you man and wife. You may kiss
the bride.”
Pickup Truck trade-in
John bought a pickup truck before the marriage, and then
traded it in for a newer truck after the marriage. A Ford truck purchased
before the marriage, and changed to a newer Dodge pickup after the marriage, is
still, John’s separate property.
Purchased before Marriage, but paid for after Marriage
John only signed the contract to buy a pickup truck before
the marriage. All the monthly payments were made by John during the marriage. Because the purchase contract was signed before
the marriage, the truck is John's separate property.
Retirement
John works for ABC Corporation and earned retirement for 20
years. During that time, he was married to Susie for 10 years. Susie gets ½ of
John’s retirement earned during the marriage. Susie gets none of John's (separate) retirement
before they were married.
Living together
If Susie and John lived together before the marriage, Susie
gets none of John's retirement during that time. This is unfair to Susie, but
she can solve the problem by marrying John before living with him.
Title in John’s Name only
If the property is community property, the name on the title
makes no difference. This is a huge difference between Texas law and states
that were English colonies. In those states, called common law states, the name
on the title makes all the difference. A Texas divorce court will divide
community property, even if the title is in only one name.
Separate Property in both Names
If separate property is in both names, Texas law says it is
a gift and is owned 50 - 50.
A Bank Account or E Trade Account
Before his marriage, John’s E-trade account had $20,000
dollars in
the account. It now has $15,000 dollars. Simple subtraction shows
that it is all John’s separate property, right? No, Texas law says it is entirely
community property.
Tracing
For a court to say the E-trade account is John's separate
property, each dollar must be traced back to a specific gift, a specific
inheritance, or shown that it was owned before the marriage. It could also be shown to be the result of a
trade of separate property, (100 shares of Exxon, owned before marriage, traded
for 150 shares of ABC Corporation). If the figures are too confusing, or if the
records are lost, all of the account will be presumed to be community property.
Tracing problems
It is common for courts to find bank accounts are community
property. Records get shredded; banks keep records for only a short period of
time. The tracing will also fail, if after the marriage, John's weekly paycheck
is deposited and mixed with the separate money. The character of the money is
lost and the account is found to be a community account.
Summary
These rules are confusing. So go back to the definition of separate
property. Was the property was a gift, or inherited, or owned before
marriage? If yes, then it is separate
property. Was the property separate property, but traded for something else
during the marriage? If yes, then it is separate property. Was the property a
personal injury settlement during the marriage? If yes, then it depends. A
"no" answer to any of these questions means that the property is
community property.
Conclusion
It is important to know the character of property in Texas.
If this is important to you, then make a list with the date of the marriage,
the date the property was obtained, what money paid for the property, and then go
talk to a lawyer.
