In the first part of this blog post we discussed “What is Community Property“.
Yes, it is possible for property to be characterized as both separate and community. For example, consider the scenario where you purchase a home during your marriage for $500,000. Additionally, suppose that the $100,000 down payment you made was your separate property. In that case, 20% of your home would be your separate property, while the remainder would be community property.
To further complicate matters, how would the state classify property when each spouse contributes an equal share of the down payment before marriage? Suppose, you and your fiancé fall in love with a beautiful house in the suburbs complete with a white picket fence and perfectly manicured lawn. You both immediately put an offer on the house that’s accepted and move towards closing. Each person contributes $50,000 of the down payment towards the dream home. In this scenario and under Texas law, property is classified at the inception of title, thus, each spouse will own a 1/2 interest as their own separate property.
Now, let’s discuss another viable possibility. Consider you and your fiancé house shopping before the big day and fall in love with the perfect starter home. Your fiancé insists that he makes the down payment on his own without your financial contribution. What happens in such a case where one spouse made the down payment on a house before marriage, but the couple pays off the house together during marriage? Is the property then a blend of separate property and community property?
No. Remember, Texas characterizes property as separate or community at the “inception of title.” If a down payment is made before marriage, the property is characterized as separate property. The fact that spouses use community funds to improve or payoff separate property may give rise to a claim of reimbursement; however, it does not change the classification of the property.
Now, you may be wondering if couples can decide among themselves on which property they would like classified as separate versus community. The answer is yes, absolutely. Prospective spouses can sign a prenuptial agreement to define what property will be separate or community property during their marriage. Likewise, married couples can enter into postnuptial agreements that define the character of their property. Couples can also agree to change the character of real or personal property from community to separate or vice-versa.
The distinction between separate and community property can be perplexing at times; however it is critical in determining how property will be distributed at death. Each spouse only has the right to control who receives his or her separate property and their share of community property at death. Marital property agreements can greatly reduce the potential for conflict by clearly establishing what property belongs to which spouse.
There is much to discuss before and after the “I’Do’s. Discussing division of assets prior to the big day may sound unromantic or pessimistic, but it’s advisable for every couple in Texas to at least start the conversation. Being practical and looking to the future is wise and can prove to be beneficial in the long run. We all want to throw caution to the wind and live happily ever after with our one true love. As appealing as fairy tales sound, it is sensible to keep both feel planted firmly on the ground in matters of asset division.
I built my law practice on the premise of being a life raft in a sea of sharks. I want to be an advocate for those that have been wronged and are too intimidated to seek help. My firm is here to explore your options, guide you through your legal journey, and give you that safe space to ask questions! There’s no such thing as a stupid question…Only the ones you don’t ask. So, my question to my clients is not “do you have any questions?” But rather “what questions do you have?”
As always, the Kazi Law Firm is standing by to help you in your time of need. Don’t hesitate to contact us today. We specialize in real estate law, landlord-tenant disputes, immigration, and wills & estate planning. Family is at the core of our practice. Just as we treat our family with respect and understanding, we treat yours. Come join the Kazi Law Firm family today!
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