People say, “Texas is a ‘community property’ state.” While true, many people also make the wrong assumption that everything belongs to both spouses.
Presumption of Community Property
Texas community property law starts with a presumption that all property (and debts) owned by married persons upon the dissolution of a marriage, whether by death or divorce, is the property of both the husband and the wife. Community property is generally divided between the spouses in the divorce decree.
But this presumption can be defeated to classify the property as separately owned by only one of the spouses. The benefit is that the separate property will generally not be divided but remain with the spouse who owns the property.
Separate Property
Generally speaking, property acquired before a marriage and property acquired during marriage through gift or inheritance, or with funds that were themselves separate property, is separate property.
A recovery for personal injury by a spouse for a loss sustained during the marriage is also separate property (but not a recovery for loss of earning capacity).
Finally, spouses may enter into a signed, written agreement known as a premarital or marital property agreement, which documents the separate property rights or can convert community property into separate property.
Overcoming the Community Property Presumption
To overcome the community property presumption, we would need to show “clear and convincing” evidence that certain property is separate, rather than community property. This is generally done by tracing and clearly identifying property as separate property at the moment when the property was first acquired.
Documentation that clearly proves that the property is separate is almost always necessary if the parties do not agree whether an asset is separate or community. Consequently, testimony that property is separate will likely be insufficient to prove separate nature of an asset.
Claims for Reimbursement
When the spouse’s community property funds or pays the debt towards one spouse’s separate property or if a spouse’s separate property funds or pays debt that is community property or the other spouse’s separate debt, a claim for reimbursement can be made.
An example of this would be if a spouse purchased a home before marriage, but then used community funds earned during the marriage to pay down the mortgage. The home is separate property but the community funds belonged to both spouses.
Another example is perhaps one spouse may have used inherited funds (separate property) to pay down a community credit card.
There are certain types of payments or debts that are not subject to a claim for reimbursement such as student loans, payments of nominal value, living expenses of a child or a spouse, or for payments for child support or spousal maintenance.
Bottom Line
The laws on community and separate property and reimbursement claims can be complicated depending on the situation. Attorney Vince Handler will help you determine which property belongs to only one spouse and which property should be divided. Contact us today.
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