Yes, Texas is one of nine states in the U.S. that uses the law of community property to divide marital assets in a divorce. It recognizes that spouses are equal partners in their marriage.
The divorce attorneys at Terry and Roberts understand that the scope of the assets to be divided is often the greatest point of contention in a Texas divorce. Even though community property should be a straightforward rule to apply, it brings about numerous complexities. In this article, we explain:
- What is Community Property
- What is Separate Property
- Legal Issues that May Arise
- Debts in a Community Property State
- Prenuptial Agreements and Community Property
- Other Factors Courts Consider
- Divorce Agreements in a Community Property State
What is Community Property?
Understanding Marital Property
In a community property state like Texas, the assets that are acquired during the marriage are part of the “community,” and they are split evenly down the middle. Community property includes both assets and debts that are incurred during the marriage.
Community property or Marital property, can include items such as homes, investment properties, cars, boats, furniture, and even artwork. If property is acquired during the marriage, there is a rebuttable presumption that it is part of the community. A divorcing party in a community property state would need clear and convincing evidence to show property is not community property. Even if one spouse alone acquires property during the marriage, it belongs to the community. If the acquisition happens during the marriage, there is no such thing as “what’s mine is mine” unless one spouse received a gift or bequest.
Practically every asset is part of the community. 401ks in a divorce as well as other retirement accounts and investments are considered community assets. Even business assets and pensions are also included. Many spouses are surprised to learn the full extent of what will be divided 50/50. However, community property does not encompass all assets.
What is Separate Property?
Property owned by individuals prior to a marriage is considered separate property, as are items like inheritances or third-party gifts given to one spouse during a marriage. Property that constituted a legal recovery for injuries sustained during a marriage is separate property unless the money was for loss of earnings. Additionally, increases in the value of separate property during the marriage remain classified as separate property; however, income generated by separate property that is distributed to or received by a spouse becomes community property.
Spouses may also choose to exclude certain items from being classified as marital property through a pre or postnuptial agreement.
Community Property Could Present Complex Legal Issues
When married, it’s incredibly common for couples to mix or commingle their assets, making them “mixed assets.” Commingling occurs when separate and community property are mixed in such a way that it becomes difficult to trace the items back to the source. And, since all assets are considered community property unless otherwise proven, mixing your assets can lead to a significant financial loss.
All assets are considered community property unless otherwise proven.
Debts in a Community Property State
In addition, debts may also present a challenge in a divorce. The usual rule is that debts incurred during the marriage belong to both spouses equally. However, in today’s day and age, many spouses will bring their own debt with them into the marriage. Many have taken out student loans, with the repayment terms lasting for decades. If one spouse takes out student loans during the marriage, the debt would belong to both of them.
Prenuptial Agreements and Community Property
If you are bringing significant property into your marriage, you should consider protecting yourself through a prenuptial agreement. This contract will give you more certainty and protection in the event of a divorce. A prenuptial agreement could define what is considered separate property. You may particularly need a prenuptial agreement if you own a business that was started before your marriage. Otherwise, you run the risk that the business will be considered community property and sold if you and your spouse cannot agree to divorce terms.
Other Factors Courts Consider When Dividing Marital Property
Under Texas Family Code Chapter 7 Courts must order a division of the marital estate in a manner it deems as just with regard for the rights of each party as well as for any children involved. This leaves property division to the discretion of a judge. While a 50/50 split can happen, the judge will consider factors such as:
- The ability of each spouse to support him/herself after divorce
- The parent that will have primary responsibility for the children and related circumstances following a divorce
- Any age disparities in the marriage
- The education or employment of the spouses
- The health and physical condition of the spouses
- Who is at fault in the breakup of the marriage
- Tax consequences of property division or the nature of the property divided
Divorce Agreement in a Community Property State
Even if you live in a community property state like Texas, you may still settle matters with your spouse through a divorce agreement. A marital settlement agreement is the most timely and cost-effective way to resolve divorce issues. Although it may require extensive negotiation, a marital settlement agreement will save you from the expense and hassle of a trial.
Regardless of your particular situation, the experienced divorce attorneys at Terry and Roberts have decades of experience handling family law in Texas. Contact the experienced divorce attorneys at Terry and Roberts today to discuss your specific legal options.