Marital Property – How Do We Divide the “Stuff”? April 17, 2015
Community Property v. Separate Property
With respect to marriage, there are two types of property: community property and separate property. Community property is the property considered to be owned jointly by both spouses together, while separate property belongs to only one spouse. Community property will be divided between spouses in a divorce (but not necessarily divided 50/50) and separate property is not divided between spouses in a divorce.
What it Means to Live in a “Community Property State”
Texas is one of nine community property states. In a community property state, the law presumes any asset acquired by either spouse (regardless of whose name is on the title, etc.) during the marriage is community property. This means that a spouse claiming to have separate property must defeat this presumption with clear and convincing evidence that the property has the characteristics of separate property.
Separate property is defined as, “property owned or claimed by a spouse before marriage, acquired during the marriage by gift, devise, or descent, or as a recovery for personal injuries sustained during the marriage.”
Community property is defined as, “the property, other than separate property, acquired by either spouse during marriage.”
Examples of Community & Separate Property
|Wages, salaries, all income (cash included) acquired during marriage||Earned income of either spouse before marriage|
|Dividends and interest earned on either spouse’s separate property during marriage||Capital gain on separate property/items purchased with separate funds|
|Dividends, interest, and capital gain earned on community property||Gifts and inheritances received before marriage|
|Housing, automobiles, boats,||Gifts and inheritances received during marriage|
|Retirement benefits, 401(k) accounts, IRA accounts, stocks, stock options, bonds, copyright royalties, patents, life insurance, and debt acquired during marriage||Recovery for personal injury sustained during the marriage (unless a portion is for loss of earnings)|
**Note: Converting property to cash or back again does not change the classification of the property as community or separate.
How Community Property Is Divided In Texas
In a decree of divorce or annulment, the court shall order a division of the estate of the parties “in a manner that the court deems just and right, having due regard for the rights of each party and any children of the marriage.”
This means that, in Texas, there no strict 50/50 division routine for how courts divide community property in a divorce. However, Texas courts generally accept a fair and reasonable property division that the parties agree to, if they can come to an agreement.
Fault In the Breakup of the Marriage
Texas courts have traditionally found that fault in the breakup of the marriage may be considered in determining what is a fair and equitable division of community property. In other words, if a court makes a finding of adultery, abandonment, or cruel treatment, the court can award the non-offending spouse a larger portion of the community property.
What Is a Reimbursement Claim?
A reimbursement claim is used in a situation where community funds were used toward improving/repairing/etc. one spouse’s separate property. If a reimbursement claim is recognized by a judge, the community estate can recover for the money it spent for the capital improvement of one spouse’s separate property. (The reverse is also true. A spouse can be reimbursed for separate funds used for community assets.)
For example, if a spouse owns a house as separate property before marriage, and then community funds of both the husband and wife are used to build a pool in the backyard during the marriage, the spouse who did not own the house can make a claim for reimbursement of the funds spent on building the pool. That is the only way for that spouse to get reimbursed, since the house (and pool) will remain that spouse’s separate property.
It is up to the judge whether to recognize a reimbursement claim, but if recognized, the funds spent on the pool would become a part of the community estate that both spouses own, which would be divided up along with everything else in the community estate. Some Texas courts have ruled that a spouse making a claim for reimbursement has the burden of proving, by a preponderance of evidence, the contributions came from the community estate. So, it is best to keep a detailed record when community funds are used toward a spouse’s separate property.
At Hayes, Berry, White & Vanzant, we have the right lawyer for every type of divorce. Whether the issue is conservatorship, possession, child support, or property, our attorneys will take care of you. Our clients come to us from all over the DFW Metroplex, including Denton, Lewisville, Flower Mound, Highland Village, or Frisco. Call us today and let us ease your worries and stress. Give us a call at (940) 387-3518 today!
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