One of the common issues that arise in a divorce in Texas is the characterization of property. Most people know that Texas is a community property state. Many people also assume that all community property has to be divided equally in the event of a divorce. However, property can be community, separate, quasi-community or mixed character, depending on when and how it was acquired. The name in which an asset is titled does not, by itself, determine whether that asset, or liability, is community or separate.
For example, I have people all the time say, “that’s his car because he put it in his name.” We always have to go back and ask the client to explain when, and how, it was acquired. Texas follows an inception of title rule. This says that if a piece of property is acquired during the marriage, it is presumed to be community property regardless of how it’s titled.
Rule #1
It is presumed that any property on hand at the time of divorce is community property. The spouse who is claiming an asset as his/her separate property has the burden of proving that claim by clear and convincing evidence.
Rule #2
If one of spouses is claiming that an asset is separate or mixed character property, they have the burden of showing that the source of funds used to purchase that asset were from some source that would be deemed separate property. This could be an inheritance, or a gift, or monies that they had prior to marriage.
It is the burden of the person claiming it as separate property to prove that the asset actually should be considered separate property. They must present clear and convincing evidence. This is somewhere in between a reasonable doubt and a preponderance of the evidence. It’s a little bit higher burden than we typically have in civil cases.
Rule #3
Even if you owned the property beforehand, unless you are able to prove that you owned it and that no community funds have gone into it, there is a significant likelihood that it will be deemed to be community property.
This happens when people have a bank account. They keep the same bank account during the marriage, and then they add their paychecks to it. It can become so commingled that you can no longer prove the portion that’s your separate property.
Rule #4
A piece of real estate that is acquired prior to the marriage is pretty easy to prove as separate property. You simply show when you got the title. If it was prior to marriage, it’s your separate property. Although there might be reimbursement claims if community funds were spent on that property during the marriage, the character of the property will be separate under the inception of title doctrine. Just be careful if you refinance that property during the marriage. Putting your spouse’s name on the property during the marriage could give your spouse a 50% interest in that real estate if your spouse argues it was a gift to them.
Rule #5
Sometimes I see situations where people bought a house during their marriage. For some reason, they only have it in one spouse’s name. That by itself does not make it that spouse’s separate property. If it was bought during the marriage, it is presumed to be community property. This is regardless of how the title is held, because it was acquired during the marriage. If the spouse whose name it’s in says, “well you know I used the $100,000 I inherited from Grandma to buy that,” it is their burden to show proof of what portion of that property is their separate property.
Proving separate property claims during a divorce requires good record keeping. The challenge for many couples is that they had not planned to get a divorce and they have commingled their estate and assets so that everything is community property. Which takes us back to Rule # 1 that all property is presumed to be community property… unless proven otherwise.