What is community property?
Texas is a “community property state,” which means that all property acquired by either spouse during marriage is presumed to belong to both spouses equally. Regardless of whose earnings paid for the property or whose name is on the account or the title, property acquired during marriage is generally community (with some exceptions discussed below). For example, the following assets are community property:
- Income, including wages, salaries, overtime, and tips;
- Cash in checking and savings accounts, regardless of whether both spouses are signatories;
- Cars, boats, and other vehicles purchased during marriage;
- Real estate purchased during marriage, even if only one spouse’s name is on the deed;
- Contributions to 401(k) plans made during marriage; and
- Business interests acquired during marriage.
What is separate property?
Separate property includes property owned by a spouse prior to marriage, property acquired via inheritance or gift, and property recovered for personal injuries (except certain medical expenses, certain lost earnings, and loss of “spousal services”). Some examples of separate property are:
- A home purchased by a spouse prior to marriage;
- Money a spouse inherits after the death of a family member;
- Contributions to a spouse’s 401(k) plan prior to marriage;
- A business formed by one spouse prior to marriage; and
- Gifts given by one spouse to another.
Separate property can also be acquired during marriage if parties execute a valid premarital agreement before marriage (a “prenup”) or a valid partition or exchange agreement after marriage (a “post-nup”).
Can property be both community and separate?
Property that is part community and part separate is referred to as “mixed character” property. A common example is when a married couple purchases a home together, but one spouse pays the down payment with inherited money. The home will be both community and separate property based on the proportion purchased with separate funds. Another common example is a retirement account. Often, one spouse has a 401(k) account to which he or she contributed prior to marriage. The funds contributed prior to marriage are separate property, but the funds contributed after marriage are community.
Why does it matter whether property is community or separate property?
In a Texas divorce, a court may not award one spouse the separate property of the other spouse. However, all property is presumed to be community, and a spouse asserting separate property must prove the property is separate. The process of proving separate property can be complicated and often requires not only a capable family law attorney but also financial experts.
Community property, on the other hand, is divided in a manner the court deems “just and right.” A “just and right” division doesn’t necessarily mean a 50/50 split. A court will consider the specific circumstances of the marriage, including each spouse’s earning potential and financial obligations, each spouse’s ongoing need for support, and whether one person is to blame for the divorce. In most cases, the community property is divided in a manner that is close to 50/50.
Outside of the divorce context, understanding marital property basics is helpful when considering marriage. A premarital agreement can clarify which property is separate and define certain property as separate even when it would otherwise be community. For example, if one spouse has significant premarital assets or makes significantly more money than the other, or if one or both spouses have children from a previous relationship, a premarital agreement may be worth considering.
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