Texas is a community property state. We are sure this is something you have heard before but did not fully understand what the phrase meant. If you are married, and currently living in Texas, you should continue reading this post for a better understanding of what it means to live in a community property state. In this post we will describe some of the common property classifications, what happens to your property if you move to Texas from another state, and the various documents you can execute if you would like to change the classification of your property or your spouse’s property. If you are interested in more information, especially if you are contemplating marriage or divorce, please call us. We can also help with drafting and executing the legal documents described in this post. Understanding community property can help you plan for your future and we want to answer any questions you might have.
In Texas, there are three marital estates. The husband’s separate property, the wife’s separate property, and community property. All property that you owned prior to marrying is your separate property. Additionally, if you acquire property during the marriage by gift or inheritance, that property is also your separate property. And, if you purchase property during marriage and use separate property funds, the property you acquire is also separate property. Naturally, each spouse enters the marriage with at least some separate property. (Please note these same rules apply to marriages between same-sex couples.) Basically, everything else acquired during the marriage is community property! That means that the wages you earn at your place of employment are community property, absent an agreement to the contrary as explained below. Speaking of wages, it is likely that when you earn a paycheck you will deposit the funds into a joint bank account. Many couples create joint bank accounts before they marry. This means that the funds used to support that newly created bank account are separate property. When you marry, however, funds deposited in that same account are now community property, unless they were a gift or inheritance. The bank account now contains both separate and community property. We call this commingling. If the need arises to distribute the funds in this account because of death or divorce, courts will use established rules to determine which funds are community and which are separate property.
Upon death of one spouse or divorce, it will be important to classify property that was acquired in another state. If you were married in another state, and acquired property while living in that other state, and then subsequently moved to Texas, the court will characterize that out-of-state property in accordance with the applicable event (either death or divorce). If you are divorcing, the court will split your property as if you have always lived in Texas. Therefore, if the property would have been community property if it were acquired in Texas, the court will classify it as quasi community property. Similarly, if the property would have been separate property if acquired in Texas, the court will classify it as quasi separate property. These classifications impact the division of property in divorce. If the marriage ends upon death of one of the spouses, however, the rules for classifying property acquired in another state are more complicated. Three principles are relevant: (1) In non-community property states, a spouse’s salary is separate property; (2) In non-community property states, title in the name of one spouse and not the other determines ownership; and (3) your property rights do not change when you move to Texas. Because of the complexity of this situation, we encourage you to contact us when you are in need of probate services because of the death of a spouse. We can help you understand the property classifications at that time.
Finally, there are several documents that can be executed that can change the classification of marital property in Texas. If you are considering one of these agreements, you are highly encouraged to engage the services of an attorney. We do not want you to be misinformed of your rights before signing anything that gives away your interest in property. A prenuptial agreement can be drafted prior to marrying and the parties can agree to a number of things allowed by law. A partition and exchange agreement can convert current or future community property into separate property. A conversion agreement can convert separate property into community property. A community property survivorship agreement can allow a surviving spouse to come to own all of the community upon the death of the other spouse. And, a cohabitation agreement can define and classify the property rights of unmarried cohabitants. All of these agreements serve an important function. If executed carefully and correctly, they can have a positive impact on the marital estate. Each requires specificity and detail, which is why we are always available to guide you through this process.
As we previously mentioned, if you considering marrying or divorcing in Texas, we can help you coordinate a preferred arrangement regarding your property rights. Give us a call and we can discuss your particular case.
Suggested tags: texas family law, family law, marriage, divorce, community property, separate property, community estate, family planning, marital agreements