For purposes of a divorce in Texas, property is classified as either separate property or community property. Separate property is all property: (1) owned or claimed by a spouse before marriage; (2) acquired by a spouse during marriage by gift, devise, or descent; and (3) that is the recovery for personal injuries sustained by a spouse during marriage, except for the recovery for loss of earning capacity during marriage. Community property consists of all property, other than separate property, acquired by either spouse during marriage.
The methods used to determine whether property is separate or community is referred to as characterization.
In Texas, all property possessed by either spouse at the time of divorce is presumed to be community property, regardless of who has possession of the property, and regardless of whether the property is titled in the name of only one spouse. Therefore, just because one spouse is named on the title, deed, or account does not make the property separate.
Property must be proven to be separate by "clear and convincing evidence". Therefore, depending upon the asset and how it was originally acquired, satisfying that standard can be difficult. For example, if a spouse owned real property before marriage and, at the time of divorce, that property was still titled in that spouse's name, then it is easily characterized as separate property. Characterization of that asset would be more difficult, however, if that real property had been sold during marriage and the proceeds had been deposited into a bank account that contained community property money (e.g. salary), thereby "commingling" separate and community property funds. In order to prove that the proceeds received from the sale of the real property still exist and are still separate property, the spouse claiming the separate property would have to "trace" the sale proceeds.
In Texas, the characterization of property during a divorce is important because the court can only divide the community property owned by the parties at the time of divorce. The court cannot award one spouse's separate property to the other spouse.
Michael Geary is a Board Certified family-law specialist and shareholder with the law firm of Geary, Porter & Donovan in Dallas.
Certified Divorce Financial Analyst
Business Valuators / CPAs