There are two ways courts can divide marital assets in the event of a divorce. The first is the method used in a majority of states: equitable distribution. Equitable distribution is a principle of common law that is used to determine how property is divided. This legal principle divides marital assets based on certain factors, such as the ability of each spouse to earn future assets and who earned the assets in the past. With equitable distribution, a court can be swayed by arguments that convince it to depart from a presumption that assets are split 50/50.
The other basis on which a court can divide marital assets in a divorce is called community property. In a community property state, 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. 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. 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.
Texas Uses the Law of Community Property
Texas is one of nine states in the U.S. that uses the law of community property to divide marital assets. Community property is a creation of civil law, meaning that it comes solely from a statute. It recognizes that spouses are equal partners in their marriage. Unlike equitable distribution, the community property principle does not rely on the presumption that a husband is responsible for taking care of a family financially.
Texas passed the law that provides for community property in 1967. Before that, there was considerable uncertainty as to how property was to be divided in divorce. The State Bar of Texas asked its family law section to draft a new and modernized statute to provide for greater equality to women in the event of a divorce. Before the law was passed, married women did not enjoy equal rights. Assets that they purchased with their own separate property belonged to their husband.
The Matrimonial Property Act equalized spousal rights in many areas of the marriage, including property division, custody, and child support. Texas aimed to create a comprehensive family law code, as opposed to relying on principles of common law that are not always clearly defined and could lead to considerable uncertainty.
Community Property Is Not as Easy to Apply as it Seems
Even though community property should presumably be a straightforward rule to apply, it brings about numerous complexities. The community property system is not as easy to understand as you may think. There are numerous reasons why 50/50 is not always mechanically applied.
Practically every asset is part of the community. 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.
Community property does not encompass all of a spouse’s assets. For example, a spouse may have worked and saved assets prior to the date of the marriage. They may have inherited money or been given a gift during the marriage. These are considered separate property, and they are not subject to the division of community assets.
Community Property Could Present Complex Legal Issues
There are many issues that could make the division of marital property more complicated in a community property state like Texas, including:
- When separate property increases in value during the course of the marriage
- When separate property is commingled with the marital estate (Mixing separate and community assets together could convert separate assets into community property)
- When a spouse continues to add to separate property using assets from the community
The point is that separate property may become part of the community, even if the spouses did not intend it. The scope of the assets to be divided is often the greatest point of contention in a Texas divorce. You should hire an experienced divorce attorney to discuss your legal options.
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.
Tips for a Community Property Divorce
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.
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.