Property Settlements

Property Settlements

Property is categorized either as community property or separate property when a Texas court tries a divorce case.

A spouse’s separate property consists of:

  1. The property owned or claimed by the spouse before marriage;
  2. The property acquired by the spouse during marriage, by gift, devise, or descent and,
  3. The recovery for personal injuries sustained by the spouse during marriage, except any recovery for loss of earning capacity during the marriage.

 

The significance of separate property is that a Texas court cannot divest a spouse of their separate property. Therefore, once a court determines that a particular piece of property is separate property, then it must set that property aside to the separate property owner. The burden is upon a spouse to prove that property is his or her separate property by clear and convincing evidence.

Community property consists of all property, other than separate property acquired by either spouse during marriage. Property possessed by either spouse during the dissolution of the marriage is presumed to be community property, unless the spouse can prove that it is their separate property by clear and convincing evidence. Community property consists of almost anything of value, such as real property, personal property, stocks, bonds, savings accounts, automobiles, retirement benefits, 401(k) accounts, IRA accounts, stock options, copyright royalties, patents, income, rental income, life insurance and virtually anything else of value.

At first glance it may not seem that difficult to tell community and separate property apart. Nothing in the law is ever as clear as it seems (if it even seems clear to begin with). Texas has had a community property law system in place since about 1840, so the courts and lawyers have had the chance to play with it over the last hundred-sixty some-odd years and make lots of little extra rules that complicate the issue.

First, we have the “community presumption”. Under the Texas Family Code, all property possessed by either spouse during or on the dissolution of marriage is presumed to be community property. So, even if you and he both know for a fact that you owned a certain item before you married him, you are going to have to prove it. The degree of proof necessary to establish that property is separate property is “clear and convincing evidence.” There is no official definition of what constitutes “clear and convincing evidence.” We know that it is a higher standard than “more likely than not” and less harsh than the “beyond a reasonable doubt” standard that is used to convict someone of a crime.

One of the ways to overcome the community presumption is with the “inception of title” rule. The separate or community character of property is determined at the EARLIEST moment to which the person claiming the property can claim title to it. When did you buy it – before or after you got married? This gets particularly sticky with real estate. The contract to buy the house you and your husband end up living in may be signed before the wedding, and the deed may be dated after the wedding. In that hypothetical situation, the date on the contract would win because it is the earliest that either of you could claim title to the house.

Another way to overcome the community presumption is through “tracing.” Tracing an asset means that there is a paper trail between the thing you own now and something you owned before you got married. For example, I own a car. When I get married, that car will be my separate property (inception of title). If I sell my car and buy a High Def 1080p 60-inch flat screen TV with surround sound system, as long as I can prove the TV was bought with the money from selling my car, the TV will be my separate property. This is a fairly simplistic example. When stocks, bonds, securities, and bank accounts are involved, you will almost definitely have to call in an expert to follow the money trail for you.

The court has discretion to distribute the community property in whatever way it believes is fair, but there must be a reasonable basis for a distribution that’s not equal. To determine whether the presumption of equal division should be adjusted, the court may consider factors such as the education, ages, and health of the spouses, as well as their respective earning capacities, skills, and business opportunities. The court may also look at whether a spouse is the primary caregiver for the couples children, and the amount of separate property each spouse owns, among other facts and circumstances. Whether one spouse was at fault in causing the marriage to fail is also a factor if the just considers it important.

Throughout the process, the divorcing spouses will have opportunities to agree between themselves on how to split the community property. If they decide, for example, to sell the house and split the proceeds, allow the wife keep all of her retirement benefits, and give the husband the vacation cabin, then they can submit a marital settlement agreement to the court including these provisions. Usually, a court will accept a negotiated agreement without further involvement. On the other hand, if the spouses cannot work together, or if there are certain items of property that they cannot agree on, then the court will decide for them.

There are also many other complex issues of community presumption that should be discussed with your attorney in order to fully understand the laws that apply to your case.  The Gregg Law Firm has the experience and knowledge to handle all complex property issues. Call us today to get started!