If you are planning on marrying with a lot of properties in your name or in the unfortunate position where divorce is imminent, you may wonder what assets are considered marital property. Marital property law does vary from state to state, so you should seek legal counsel in the state where you reside to clarify what the marital assets definition is for your particular case.
Nine states—including Texas—abide by community property laws, which generally means property acquired during marriage is subject to either equal or just and right (which isn’t necessarily equal) division upon divorce.
Should you and your spouse end up divorcing in a community property state like Texas, it’s important to understand the difference between community property and separate property. You should also educate yourself regarding how to ensure your separate property will be protected and how the marital home will be dealt with upon divorce.
Marital assets definition in Texas
The definition of marital assets in Texas is clearly defined in Chapter 3 of the Texas Family Code, “Marital Property Rights and Liabilities.” The state defines separate property (which is solely the property of one spouse and generally not subject to division upon divorce) as:
- Property owned or claimed by a spouse before marriage;
- Property acquired by a spouse during marriage by gift, devise or descent; or
- Recovery for personal injuries sustained by a spouse during marriage (except any recovery for loss of earning capacity during marriage).
Texas’ marital assets definition for community property includes the “property, other than separate property, acquired by either spouse during marriage.” Seems pretty cut and dried, right? However, you should know that there is a big presumption when it comes to community property in Texas marital property law: “Property possessed by either spouse during or on dissolution of marriage is presumed to be community property.”
Why is the presumption of community property such a big deal?
The reality is, property ownership tends to get fuzzy as years go by. Paperwork gets lost and people simply forget when and where they acquired things. The state of Texas also requires parties to provide clear and convincing evidence to prove an asset is separate property and not community or joint marital property—otherwise it will be subject to just and right division upon divorce.
Again, Texas law abides by the Inception of Title rule, which means if the date of purchase reflected on the title is prior to the date of marriage, that property would be considered separate. If you lose the title and the county has no record of it, you will have an uphill battle ahead of you.
One way to avoid confusion is to file a record of your separate property in the county where you reside and/or where the property exists (say you live in Tarrant County but own 200 acres of land in Harris County). You and your spouse could also execute a legal agreement between the two of you, such as a prenuptial agreement or postnuptial agreement, that clarifies which property would be considered separate in the event of divorce.
What is the marital home definition in Texas? And what happens to it during divorce?
The marital home is one of the biggest (if not THE biggest) assets many couples own. What is a marital home and how is it divided in the event of divorce in Texas? The marital home is simply the place a couple resides in as their primary residence during marriage.
The question is: Who owns the marital home? If a couple purchased the home together during the marriage it would be considered community property. Alternatively, if one of the spouses purchased the home prior to the marriage, based on the Inception of Title rule, that house would be considered separate property.
Worried about getting kicked out of the marital home your spouse owns? Check out our “Can a spouse kick you out of the house” post on this topic.
Now, if the couple used community funds to improve the “separate property” home, say they added a third-floor addition or guest house to the property, the other spouse could file a reimbursement claim for a portion of those expenses during the property division portion of the divorce. The same applies to improvements—which does not include regular maintenance or wear and tear type repairs—to other types of properties, like a rental property for example.
Learn why Justin believes couples should be cautious about buying property, including homes, together prior to marriage in this past post: “What happens to property owned before marriage in Texas.”
What is considered marital property in common law marriage?
If you meet the conditions of common law marriage in Texas, the same marital assets definition that applies to traditional marriages will apply to your common law marriage should you decide to divorce. The three conditions required for a legally valid common law marriage in Texas include:
- Both parties agreed to be married; and
- After agreeing to be married they lived together as husband and wife in the state of Texas; and
- They represented to others (often described as “holding out” to others) that they are a married couple.
Couples who are legally common law married—which means they are legally married—will need to go through the same legal process to disentangle themselves and their assets from each other as traditional married couples. And of course, the same laws regarding community property and separate property will apply.
Things to consider when marrying with a lot of properties (either in your or your future spouse’s name)
If you’re reading this article, you’re probably wondering how your marital assets will be divided in the event of divorce. Some people with few assets enter marriage to a party with sizeable assets assuming they will have a stake in those assets should they divorce. On the flip side, high earning individuals and those who enter marriage with multiple properties may be worried about losing valuable assets in a divorce.
While we’d like to believe that most people enter marriage hoping it will last a lifetime, we all know that’s not always the case. I encourage people with few to no assets not to assume their spouse will be generous with their separate assets in the event of divorce (oftentimes they are not). This is especially true later in life when it will be more difficult to support yourself as time goes on. You may want to look into a prenuptial agreement or post marital agreement to clarify what your financial settlement will look like if you divorce and/or continue to earn your own income and save for retirement just in case you end up on your own.
As for the affluent individuals who are fearful of losing sizeable chunks of their separate properties in a divorce, Texas is a favorable state when it comes to separate property (as noted in the section above). However, you should know that any income you earn from your separate property during marriage is generally considered community property. And of course, you will need to overcome the presumption of community property for your separate assets in the event of divorce. Taking the proper legal steps to formally establish what is your separate property can save you a lot of headaches down the road.
Quick Takes: FAQs about marital assets Texas clients ask our firm
What are the key differences between community property vs separate property in Texas?
The state of Texas presumes that any property jointly acquired during marriage is community property in a Texas divorce. Texas Family Code Chapter 3 clearly distinguishes separate property from what is marital property in Section 3.001, which states that a spouse’s separate property consists of:
- The property owned or claimed by the spouse before marriage;
- The property acquired by the spouse during marriage by gift, devise, or descent; and
- The recovery for personal injuries sustained by the spouse during marriage, except any recovery for loss of earning capacity during marriage.
By the way, when it comes to community property vs marital property, those terms refer to the same property under Texas community property laws, so we use them interchangeably throughout this section.nder Texas community property laws, so we use them interchangeably throughout this section.
How does separate property become marital property under Texas marital law?
If they choose, a married couple can formally agree to designate what was once considered separate property as marital property in the event of divorce. These formal, legal agreements often occur inside of prenuptial agreements and post marital agreements.
If a spouse doesn’t take steps to provide proof or legally clarify what separate property is rightfully theirs, that separate property may also be presumed to be marital assets, meaning the property would be subject to just and right division should the couple divorce. Many couples also make the mistake of comingling funds they bring into the marriage. When those funds enter a shared bank account, it can be difficult to trace what money belongs to which spouse as years go by.
What are considered examples of marital property in Texas?
The sky is almost the limit (see next question for the exceptions) when it comes to what marital assets Texas couples should consider part of their community estates. As long as the property was acquired from the date of marriage up until the date of divorce., the state presumes the property acquired to be jointly owned. Examples of community property in Texas, include:
The family home and any vacation homes or other real estate the couple purchased during marriage.
Vehicles (cars, trucks, boats, RVs, etc.) the couple purchased during marriage, regardless of which party’s name is on the title.
Income either spouse earned during marriage, including unemployment compensation, reimbursement for lost wages and income from separate property (like rent earned from an apartment building).
Personal property either spouse purchased during marriage, including jewelry, home furnishing, electronics, antiques, artwork, etc.
Livestock, exotic animals and domestic pets purchased during marriage.
Separate property that has been formally designated as community property.
Contributions made to retirement accounts, 401ks and pensions during the marriage.
Money remaining in both joint and separate bank accounts at the end of the marriage.
What is not considered marital property in Texas?
There are a few types of property that do not fall under the marital property definition. The items are considered separate property instead of jointly owned or community property. As previously noted, the state of Texas clearly states that a spouse’s separate property consists of:
The property owned or claimed by the spouse before marriage;
The property acquired by the spouse during marriage by gift, devise, or descent; and
The recovery for personal injuries sustained by the spouse during marriage, except any recovery for loss of earning capacity during marriage.
Some examples of assets that would NOT be considered marital property in a Texas divorce include:
Jewelry gifted to a spouse during marriage, whether it be from a family member or the other spouse.
An inheritance received by a spouse before or during marriage.
Artwork, antiques and other items of value a spouse owned prior to marriage.
Vehicles that the spouses owned prior to marriage.
Real estate (homes, land, ranches, apartment buildings, industrial sites, etc.) a spouse owned prior to marriage.
Money in retirement accounts, 401ks and pensions that was accrued by a spouse prior to marriage.
A personal injury settlement received by a spouse, not including recovery for loss of income capacity during marriage.
Are separate bank accounts considered marital property in Texas?
Generally, yes. Unless the bank account was previously and formally designated as separate property, any money in a couple’s separate bank accounts would be considered community property or marital property in the event of divorce.
In the event of a divorce, what are marital assets that are most commonly disputed in Texas?
The marital assets Texas couples dispute most often tend to be those assets that may be separate property but the rightful owner can’t prove they owned the property prior to marriage. Couples increase the likelihood of this happening by comingling assets in the same bank account. It gets more difficult to distinguish between what money is separate property and what money a part of the community estate as more time elapses.
Many couples also fight over the family home, due to the memories attached to it, especially when children are involved. In addition, disputes over family businesses can be challenging because you often have different opinions regarding the value of the business, how money should (or should not) be spent on the business during the divorce and who should remain involved in the business once the divorce is finalized.
How do prenuptial agreements affect the division of marital assets in Texas?
Both prenuptial agreements and post marital agreements can be used to establish how a marital estate will be divided in the event of divorce. A couple can clarify specifically what marital assets each spouse will walk away with when the Texas courts finalize the division of assets, should they go their separate ways.
Both post marital and prenuptial agreements are considered legal contracts and will be enforceable in Texas, provided they are drafted properly and meet certain conditions required by the state. Those requirements include that the agreement must:
Be put in writing.
Be signed by both parties and done so voluntarily.
Not be signed under the duress of either party.
Not contain fraudulent information.
Include full disclosure of all assets and debts.
What role does inheritance play in defining marital assets in Texas?
According to Texas marital laws on community and separate property, an inheritance is considered the separate property of the individual who received it. If you’re a spouse who wants to protect your inheritance and ensure it remains your own separate property, you would be wise to keep the inheritance in a separate bank account and execute formal documentation to legally designate those funds as separate property.
If those funds are deposited in a joint bank account, things could get murky, especially over time. Now, if a spouse would like to share an inheritance with his or her spouse, the couple can also take steps to formally designate the funds as community assets.
Does the length of the marriage affect the division of marital property in Texas?
During a divorce, the goal of the Texas courts is to make sure the equitable distribution of the marital estate is “just and right.” There are some cases where a judge may decide to tip the balance of the marital estate in one direction, and the length of marriage may be considered, depending on the circumstances of the case.
For example, if a retired couple is getting divorced and one of the spouse’s has health issues, the court may decide to tip that scale in their direction. Again, it all depends on the circumstances. On the other hand, length of marriage does affect the amount and duration of spousal maintenance (spousal support) in Texas. While the amount of spousal support a spouse can receive is minimal in Texas, it does increase in relation to the duration of marriage.
How will the court divide our marital debts?
In Texas, debt accrued jointly during marriage, like the mortgage on a home, would be equitably divided between the two parties. Generally, debts that a spouse takes on for their own personal needs, like a business loan on a business owned prior to marriage (separate property) or student loans, would remain the obligation of the individual spouse.
According to the Texas Family Code § 3.201-3.203, there are some situations where a spouse may be liable for the other spouse’s actions that resulted in a debt, such as when:
- The spouse acts as an agent for the person.
- A spouse fails to fulfill a duty of support for their spouse, so another party provides money or goods to the spouse, resulting in a debt being owed to the party who helped out. (See Texas Family Code Chapter 2, Subchapter F.)
What does this mean in layman’s terms? In the first scenario, say your spouse takes out a car loan on behalf of both of you, to which you agreed, you would both be liable for the debt. In the second scenario, if your spouse abandoned you and left you with his portion of the mortgage to pay, and your parents floated you a loan to cover it, he would be liable for paying your parents back.
Have questions about divorce and property division in Texas?
If you live in the Dallas / Fort Worth area, the experienced legal team at the Sisemore Law Firm is here to help. To schedule a confidential case review with a family law attorney at our firm, please call our office at (817) 336-4444 or schedule a consultation online.
