Did you get married in a community property state?

Marriage is a monumental step for any couple, but did you know that where you get married is almost as important as who you marry? I know that sounds ridiculous, but the state in which you marry will dictate how your assets will be divided if your union ends in divorce. While immersed in the euphoric fog of true love and wedded bliss, the mere fleeting thought of divorce sounds inconceivable. I love fairy tales as much as the next girl, but I would be remiss if I did not remind you that divorce in this country is a reality faced by more than 40% of couples.

Texas is one of the nine community property states in the United States. Generally, this means that any property acquired by a couple during their marriage (with a few exceptions) is equally owned by both spouses. As you may infer, this can have a profound effect on the dissolution of property during divorce proceedings and act as a double-edged sword.

Community v. Separate Property

Texas classifies property owned by a spouse as community property or separate property depending on how and when it was acquired. According to the Texas Constitution, separate property is that which is “owned or claimed before marriage, and [property] acquired afterward by gift, devise, or descent.” Thus, property that a spouse acquires before marriage is considered separate property. However, Texas presumes that property a spouse acquires while married is community property, except if the spouse received the property by gift or an inheritance.

For example, if you owned a house before your marriage, that home would be your separate property. Similarly, if you inherited a house from your parents, even during your marriage, that house would also be your separate property. The property retains the classification as separate or community regardless of whether you convert it to cash or back again. Another example would be if you sell a vacation cabin that was your separate property, the proceeds from the sale will still be separate property. Texas holds the separate property’s classification in this case even though you sold the property while you were married. Furthermore, if you reinvest the proceeds of the sale into another house titled in your name, that house would also be your separate property, even though you purchased it during your marriage. I know the characterization of property can be confusing and may seem like splitting hairs, but an experienced attorney can assist you with this.

Another common problem that we see everyday is the commingling of funds or property. Commingling means mixing the separate property with the community to the point where it is difficult to “trace” the origin of those funds or property to prove their separate nature. Thus, it is critical that you purchase property in such a way that it does not raise the presumption of a gift to your spouse. For example, during your marriage, you decide to buy an upscale condominium in a high rise building with your separate property. This condo would be considered separate property under Texas property laws. However, if you include your spouse’s name on the deed, one could argue you intended to make a gift of half the property to your spouse.

Taking this example one step further, if however, you owned the upscale condo before your marriage, and rented the unit out during your marriage, the rental income would be classified as community property. However, if you sold the condo during your marriage, the proceeds of the sale would be considered separate property. Are you confused yet? Texas law provides guidelines as to what is classified as separate versus community property.

Community Property:

  • Income either spouse earns during the marriage
  • Property purchased with income earned during the marriage
  • Dividends, interest, and capital gain earned on community property
  • Individual contributions to pension, 401K, or other retirement accounts from the date of marriage
  • Dividends and interest earned on either spouse’s separate property during the marriage
  • Unemployment compensation and payment for lost wages

Separate Property:

  • Income earned by either spouse before marriage
  • Property owned by either spouse before marriage
  • Capital gain on separate property, such as appreciated stock
  • Any property acquired by gift or inheritance
  • Retirement contributions made to a spouse’s retirement account before marriage
  • Personal injury damages for a physical injury settlement, even during the marriage (except for lost wages which are community property)

Now you may be asking yourself if property can be characterized as community and separate simultaneously? Excellent question! This topic will be addressed in the next blog post, so stay tuned.

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!

Why swim alone in shark-infested waters when you don’t need to?