Community Property versus Separate Property during a Texas Divorce

When a married couple seeks a divorce, property must be divided in a just and right way. It is not always necessarily equally between them.  Texas is a “community property” state. In general, this means that any property acquired by a couple during their marriage (with a few exceptions) is equally owned by both spouses.

Many times, couples who are planning to dissolve their marriage question how much, if any, each spouse has in the couple’s assets and liabilities.  These questions usually arise when it comes to inheritance, cash and property either from before the marriage or gifted during the marriage.  Different states have different laws. Texas is a “community property” state. In general, this means that any property acquired by a couple during their marriage (with a few exceptions) is equally owned by both spouses.

“Separate property,” however, is not part of the marital estate and is not subject to division. Each spouse in Texas keeps their “separate” property, but the community property will be divided. In order to answer the above question, therefore, one must be able to identify what is community and what is separate property.

In Texas community property means all real and personal property, both tangible and intangible, acquired by either or both spouses during the course of the marriage, up to the date of the final divorce hearing. This includes property owned by either or both spouses as of the date of filing of a petition for divorce.  There are a few exceptions.

Just because an item is initially “separate property” does not mean it will remain separate property. Texas law holds that in some cases, based on the actions of the parties, the separate property may turn into community property. This is called transmutation. The transmutation of separate property, then, means converting what started as separate property into either community property or the separate property of the other spouse. Under Texas divorce law, transmutation may occur by agreement, by gift, or by commingling.

One method of causing transmutation is where properties purchased with “separate” funds, are titled jointly. This means if one spouse uses their separate property to buy something, such as a piece of property or a vehicle, but titles it in both spouse’s names, the act of titling it in both names creates a rebuttable presumption of a gift to the marital estate, thereby potentially changing, or transmuting, the separate property to community property.

Another way separate property can become marital property is under the theory of “commingling.” Commingling may occur when separate and marital property are mixed together. If one spouse receives an inheritance, for example, but then spends some or all of the inheritance money on an item that is jointly titled, such as a house or vehicle, this can have the same effect as jointly titling a piece of property or item that was otherwise separate. It can turn that money into marital money.

Another way to turn separate property into marital property is where the non-owner spouse expends their time, money and effort on the separate property which preserves or increases its value. If one spouse, for example, were to own a rental property, but the other spouse worked to maintain it and/or manage it over the years, these actions could transmute the rental property into a marital asset. Similarly, if a spouse uses income from their employment for the upkeep of separate property, such as a pre-marital rental property of the other spouse, because employment income after marriage is a marital asset, it may be argued that spending money after marriage, on a separate asset of the other spouse’s, can change the characterization of separate property into a marital asset.

The lesson in Texas is that any spouse who owns property before marriage, or who receives separate property, such as a gift or inheritance during the marriage, and who wants the property to stay as separate property, should follow these simple steps: (1) ensure that item is titled only in that spouse’s name; and (2) make sure no marital assets are used to maintain or care for separate property. Seeking advice from an attorney knowledgeable in family law may be critical in ensuring one spouse is not unintentionally turning a separate asset into a marital asset, subject to equitable division in the event of a divorce.

Having an attorney with the resources and knowledge to give you the best representation is vital to your interest and the interest of your family.  You also want to make sure they will exhaust all avenues and be willing to research, pursue and implement strategies to provide the best possible outcome.

Rob McAngus, Partner with Verner Brumley Parker, P.C., is Board Certified in family Law and his practice is devoted primarily to family law, including high conflict divorce, custody cases, and complex property issues. In addition to being selected on the Board of Directors for the Family Law Section of the Dallas Bar Association; he values your priorities as a parent and works with you to achieve the goals that will help transition your family to a new normal.  As both an adopted child and a member of a blended family, Rob can provide a unique perspective in the practice of family law.

Rob has been recognized in Super Lawyers as a Rising Star in 2016 through 2020, and recently The National Advocates recognized Rob as one of the Top 40 Under 40.  He can be reached by calling 214.526.5234 or email at rmcangus@vernerbrumley.com.  Mr. McAngus received his bachelor’s degree cum laude and master’s degree from Baylor University and graduated cum laude from the Dedman School of Law at Southern Methodist University.