Flowers, puppies, rainbows, music \u2013 just wanted you to have a happy moment before we waded into the law regarding community and separate property.<\/p>\n
Texas is a community property state. That means that all of the property belonging to a married couple \u2013 whether titled in both of their names or only one \u2013\u00a0is\u00a0presumed\u00a0to be community property. Proof that a certain property is separate (belonging to one spouse) has to be by clear and convincing evidence, which is a tremendously heavy burden.<\/p>\n
Why should you care how the property is titled? It matters in\u00a0a lot\u00a0of\u00a0situations. When you die, your estate will be all of your separate property and \u00bd\u00a0of the\u00a0community property. If you are ever under\u00a0a guardianship of the estate,\u00a0the guardian will usually manage your separate property and \u00bd\u00a0of the\u00a0community property. If you divorce, the court cannot award your separate property to your spouse, but your community property interest is fair game. You have a right to manage and sell your separate property without your spouse\u2019s involvement, but do not have that\u00a0same\u00a0right with your community property.<\/p>\n
So what is separate property? It\u00a0is property\u00a0that\u00a0you owned before you were married, property you inherited, property you\u00a0were gifted, property you acquired when you lived in a\u00a0non-community property state,\u00a0and damages you recovered for a personal injury (not including any award for lost earnings).<\/p>\n
This all seems\u00a0fairly\u00a0simple\u00a0\u2013 what, you ask, is\u00a0the problem? Well, it is what happens to your separate property when you are married.<\/p>\n
While any increase in value to your separate property remains separate, any income from the property is community property. Imagine a separate property stock that issues a dividend. The dividend is community property. If you reinvest the dividend in the same stock account, you have now commingled your community property and separate property interests.<\/p>\n
Now\u00a0you\u2019ve\u00a0got\u00a0problems. Because the property\u00a0has been\u00a0commingled, you will have to trace the separate property interests. Without adequate records,\u00a0tracing is almost impossible.<\/p>\n
Some people want to convert their separate property into community property, and mistakenly think they can do that by simply adding their spouse\u2019s name to the title. Unfortunately, that\u00a0doesn\u2019t\u00a0make the property community. Instead, that \u00bd interest is a gift to the spouse. A gift is, of course, separate property. Now the property is owned \u00bd separate by the original owner, and \u00bd separate by the spouse.<\/p>\n
There is a solution for couples who wish to maintain separate property. They can enter into a written marital agreement that identifies specific property as separate. It can also provide that income from separate property is not community property and that a spouse\u2019s earnings are separate property. There are some statutory requirements for marital agreements, so if this is something you want to do, make sure you work with an attorney.<\/p>\n
There is a lot more to the community property\u00a0law. It is a nuanced law with, admittedly, some blurred lines.<\/p>\n
Hammerle Morris Law Firm. Give us a call. We can help.<\/p>\n