In Texas, marital property consists of all property that a spouse brings into a marriage or acquires during the marriage. Subject to some limited exceptions, all marital property in Texas can be characterized as “separate,” “community,” or “mixed.”
Separate property is property that does not owe its existence to the marriage; it is acquired or created apart from the marriage and is owned individually by each spouse. In a divorce, the court is prohibited by law from divesting a spouse of title to his or her property by awarding it to the other spouse. There are two broad categories of separate property: intrinsic and derivative.
Intrinsic Separate Property
- Property acquired before marriage (e.g.: one spouse owned a house, vehicle, or 401K before getting married).
- Property acquired by devise or descent (e.g: one spouse inherited a house or cash from their deceased relative).
- Property acquired by voluntary third-party without consideration (e.g.: one spouse’s relative unconditionally gave money as an intended gift and the spouse accepted the money).
- Property or income arising from interspousal gift (e.g.: husband gave wife a diamond ring as an intended gift and the wife accepted the ring).
- Property recovered for personal injury (e.g.: a spouse received an vehicle accident insurance settlement for suffering bodily injury, mental anguish, and pain and suffering).
- Property acquired by agreement (e.g.: spouses can enter into a written agreement that certain property they have acquired or will acquire and derived income will be separate property).
- Spouses can also agree in a written right-of-survivorship agreement that all property to subject to the agreement will become the separate property of the surviving spouse after the other spouse dies.
- Property acquired while domiciled in another state (e.g.: one spouse was living outside of Texas when they purchased a boat).
Derivative Separate Property
Derivative Separate Property is property that gets its separate property character because it has an intrinsic-separate-property source.
- Property acquired in exchange for separate property (e.g.: Spouse trades-in the motorcycle owned prior to the marriage for a new motorcycle).
- Property acquired with separate funds (e.g.: Spouse purchases a house with the money in that existed in their savings account before the marriage).
- Property acquired on separate credit (e.g.: Spouse purchased a vehicle with money borrowed solely based on their credit and not on the other spouse’s credit).
Most will need an attorney to examine individual situations as there are many exceptions or significant additional details that spouses need to know. A common example is that any income arising from a gift during marriage will be community property.
For instance, if a spouse inherits a house from their deceased relative, the house is separate property. But if the spouse subsequently rents out that house during the marriage, all rental income that house produces will be community property.
To complicate it further, a gift given by one spouse to the other spouse is the recipient’s spouse’s separate property, and any income arising from that gift is presumed to be a separate property gift.
It is important to determine the characterization of your property when going through a divorce. This can be complicated and frustrating. Call attorney Vince Handler today to discuss any unique situation you may have.