What is community property?
Texas is a "community property state," which means
that all property acquired by either spouse
during marriage is presumed to belong to
both spouses equally. Regardless of whose earnings paid for the
property or whose name is on the account or the title, property
acquired during marriage is generally community (with some
exceptions discussed below). For example, the following assets are
community property:
- Income, including wages, salaries, overtime, and tips;
- Cash in checking and savings accounts, regardless of whether both spouses are signatories;
- Cars, boats, and other vehicles purchased during marriage;
- Real estate purchased during marriage, even if only one spouse's name is on the deed;
- Contributions to 401(k) plans made during marriage; and
- Business interests acquired during marriage.
What is separate property?
Separate property includes property owned by a spouse
prior to marriage, property acquired via
inheritance or gift, and property recovered for personal injuries
(except certain medical expenses, certain lost earnings, and loss
of "spousal services"). Some examples of separate
property are:
- A home purchased by a spouse prior to marriage;
- Money a spouse inherits after the death of a family member;
- Contributions to a spouse's 401(k) plan prior to marriage;
- A business formed by one spouse prior to marriage; and
- Gifts given by one spouse to another.
Separate property can also be acquired during marriage if
parties execute a valid premarital agreement before marriage (a
"prenup") or a valid partition or exchange agreement
after marriage (a "post-nup").
Can property be both community and separate?
Property that is part community and part separate is referred
to as "mixed character" property. A common example is
when a married couple purchases a home together, but one spouse
pays the down payment with inherited money. The home will be both
community and separate property based on the proportion purchased
with separate funds. Another common example is a retirement
account. Often, one spouse has a 401(k) account to which he or she
contributed prior to marriage. The funds contributed prior to
marriage are separate property, but the funds contributed after
marriage are community.
Why does it matter whether property is community or separate property?
In a Texas divorce, a court may not award one spouse the
separate property of the other spouse. However, all property is
presumed to be community, and a spouse asserting separate property
must prove the property is separate. The process of proving
separate property can be complicated and often requires not only a
capable family law attorney but also financial experts.
Community property, on the other hand, is divided in a manner
the court deems "just and right." A "just and
right" division doesn't necessarily mean a 50/50 split. A
court will consider the specific circumstances of the marriage,
including each spouse's earning potential and financial
obligations, each spouse's ongoing need for support, and
whether one person is to blame for the divorce. In most cases, the
community property is divided in a manner that is close to
50/50.
Outside of the divorce context, understanding marital property
basics is helpful when considering marriage. A premarital agreement
can clarify which property is separate and define certain property
as separate even when it would otherwise be community. For example,
if one spouse has significant premarital assets or makes
significantly more money than the other, or if one or both spouses
have children from a previous relationship, a premarital agreement
may be worth considering.
The content of this article is intended to provide a general guide to the subject matter. Specialist advice should be sought about your specific circumstances.
