What is community property and what is separate property?
Texas is a “community property” state meaning that property is classified as either community property or separate property.
Property owned prior to a marriage is separate property while property acquired during the marriage is presumed to be community property. However, property acquired as a gift, inheritance, or bequeathal in a Will is separate property.
Examples of separate property:
- Property and income owned or earned prior to marriage
- Capital gains
- Personal injury claims for injuries
Examples of community property:
- Income during the marriage
- Property acquired during the marriage
- Dividends and interest
- Personal injury claims for lost wages
- Retirement benefits accrued during marriage
Property retains its character through mutations such as selling a house and buying a new house. For example: If one spouse owned a house prior to the marriage and sells that house, the cash proceeds would remain separate property. If those cash proceeds are used to purchase another house, the second house is also the separate property of the spouse that sold the first house and applied the proceeds to purchase the second house.
If one spouse owns a house prior to the marriage, the house is that spouse’s separate property. If the married couple puts community property funds into improving, maintaining, or repairing the one spouse’s separate property house, there could be a claim for reimbursement by the spouse who does not own the house as separate property but the house would remain the separate property of the spouse who owns the house as community property.
If someone wants to retain the character of their separate property, it is important that they keep their separate property compartmentalized and not commingled with community property assets. Separate property can be traced back to determine its character but doing so can be difficult and cost prohibitive if the commingling happens for a period of time.
The above description of community and separate property is very general and simplified to answer basic questions. Each scenario should be evaluated based on the facts of that scenario.
For more information you can review this section of the Family Code: https://statutes.capitol.texas.gov/Docs/FA/htm/FA.3.htm