by Houston Divorce Attorney Sam M. “Trey” Yates, III
The Texas Marital Property System governs ownership, management, liability, and disposition of all property possessed before, during and upon dissolution of marriage. There are two major categories of marital property in the State of Texas: Community Property and Separate Property.
Separate property consists of property owned or claimed by a spouse before marriage; property acquired by a spouse during marriage by gift, devise, or descent; and, recovery for personal injuries sustained by a spouse during marriage, except any recovery for loss of earning capacity during marriage.
Community property consists of the property, other than separate property, acquired by either spouse during marriage. This is true regardless of which spouse has possession of the property. The fact that one spouse is named on the title, deed, or account, or that one spouse receives the asset as payment for personal services (e.g. salary), or the asset will not be paid until a later date (e.g. retirement benefits), will not change the character of the property.
Presumption of Community Property
In Texas, there is a legal presumption that property possessed by either spouse during or on dissolution of marriage is presumed to be community property. This legal presumption can only be overcome by “clear and convincing evidence” that the property in question is indeed separate property. The most common way of proving separate property is by tracing the asset from the date of acquisition to the present date.
Because of the presumption that property on hand at death or divorce is community property, many people with substantial assets enter into premarital property agreements to clarify the nature of their assets or to change the rules applicable to division of their property.
Right to Reimbursement
The increase in value of a spouse’s separate property during marriage is generally considered separate property. However, a spouse may have a claim for reimbursement when the community estate in some way improves the separate estate of one of the spouses, or vice versa. The right of reimbursement is not an interest in property or an enforceable debt; rather, it is an equitable right that arises upon dissolution of the marriage through death, divorce, or annulment.
Clearly Defined Assets
It is highly advisable for married couples to clearly define whether an asset is community or separate property not only to protect it from the claims of possible creditors, but also to determine how it will be divided upon divorce or death. This is best achieved through the use of Pre-Marital and Marital Property Agreements, which will be discussed in detail in my next blog post.
Sam M. “Trey” Yates, III is a Houston-based Board Certified Family Law Attorney and creator of The Guide to Good Divorce seminars for women. If you have questions about your Houston divorce, please contact The Law Office of Sam M. “Trey” Yates, III, P.C. for a consultation.