Texas is a community property state, meaning when a couple gets divorced, the court will divide all marital assets in accordance with the community property system. However, any assets considered “separate property” will remain with the spouse who acquired them, even if they acquired them during the marriage. Thus, determining what constitutes community property and what constitutes separate property is crucial in a Texas divorce.
The presumption under the law is that all property acquired by either spouse during the marriage is community property. However, one or both spouses may want to establish an asset as their separate property.
Separate property can include any of the following:
• Property owned by a spouse before the marriage;
• Property that one spouse inherited;
• Property received by a gift (even from the other spouse); and,
• Money recovered in a personal injury case.
To establish that an asset is separate property, a spouse must prove that is the case by clear and convincing evidence. However, there are a few other issues worth mentioning regarding how courts divide assets during a Texas divorce.
Separate property assets that are co-mingled, or combined, with community property to the extent that the origin of the assets cannot be traced will likely not be considered community property. For example, if you inherit a lump sum of money after a loved one passes, and then you deposit that money into a joint bank account with your spouse, and the two of you use this account to pay bills, make improvements to your house and continue to deposit your paychecks and other money into this account — it may become extremely difficult to fully and completely trace the money inherited money.
Additionally, while Texas divorce laws apply community property laws by default, soon-to-be spouses are free to draft a prenuptial agreement. Thus, if you and your spouse want to work out a different arrangement, you are free to do so. If you are already married, you can still come up with your own property distribution rules through a post-nuptial agreement. A post-nuptial agreement is essentially the same as a prenuptial agreement, except it is entered into after marriage.