The Characterization of Property in Texas

I have written before that in the case of intestacy, the characterization of property as separate or community dictates how and to whom it is distributed.  It also affects which property you can dispose of in a Will at your death.

But how does one distinguish between which property is community and separate? The following is an explanation of how property is characterized in Texas.

Characterization of Property

In Texas, all property is classified as community or separate property depending on when and how it was acquired.

Property acquired before a marriage is classified as separate property, while property acquired during a marriage is presumed to be community property, except if acquired by gift, devise or descent.

Property retains the classification as separate or community regardless of whether it is converted to cash or back again. So for example, if you sell a home that was your separate property, the proceeds from that home will be separate even though you sold the property while you were married. Or if you receive an inheritance while you are married, the inheritance would be separate property.

However, if you want to retain the separate nature of that property, it’s important that you don’t commingle the property with community property. Otherwise it may be difficult to “trace” the property in a way that proves that it is separate property.

Distinguishing Between Community Property and Separate Property

The following property is classified as community property:

    • Income either spouse earns during the marriage
    •  Property purchased with income earned during the marriage
    • a house or other real estate purchased during the marriage
    •  Dividends, interest, and capital gain earned on community property
    • Dividends and interest earned on either spouse’s separate property during the marriage

Separate property includes any of the following:

    • Income earned by either spouse before the marriage
    • Property owned by either spouse before the marriage
    • Capital gain on separate property, such as appreciated stock
    • Any property acquired by gift or inheritance
    • Personal injury damages for an physical injury sustained, even while married (except for lost wages which are community property)

So for example, if you owned a condominium before you were married, and rented the condominium out after you were married, the rental income would be community property. However, if you were to sell the condominium after you were married, the proceeds of the sale would be separate, assuming you don’t commingle the proceeds with community property in a way that makes them untraceable.

Can Property Be Separate and Community at the Same Time?

It’s possible for property to be characterized as both separate and community. For example, suppose you purchase a home during your marriage for $200,000 and use the proceeds from the sale of separate property to put down a down payment of $50,000, 25 percent of your home would be your separate property, while the remainder would be owned by the community.

Can Spouses Agree Which Property Is Separate or Community?

Prospective spouses can enter into prenuptial agreements in anticipation of marriage to define what will be community property and what will be separate property during their marriage.

Married couples can enter into postnuptial agreements that defines the character of their property. Marital couples can also agree to change the character of real or personal property from community to separate or separate to community.

The distinction between separate and community property can get a bit confusing at times but is very important in determining how property is distributed at death. Since each spouse only has the right to determine who receives his or her separate property and their share of community property at death, marital property agreements can reduce the potential for conflict by clearly establishing what property belongs to which spouse.

Comments

  1. If I purchase a home entirely with money from an inheritance, will it then become community property if my husband were to help pay for taxes, electric bills, etc?

    • The character of the property should not change, but depending on the types of expenditures made, a spouse may be entitled to reimbursement for contributions that enhance the value of the separate estate.

  2. If I fund the downpayment and closing costs of a home prior to marriage, but once married (1 month later) the payments are made through a joint checking account, does that make the house separate or community property or a mixture of both?
    THANKS!

    • Whether property is characterized as separate or community is fixed at the “inception of title.” If acquired before marriage, the property would be separate. The fact that community funds are spent to improve or payoff separate property may give rise to a claim for reimbursement, but doesn’t change the classification of the property.

  3. If the home was purchased prior to being married, but then was refinanced during the marriage, would that make it community property at that time even though I am not on the paperwork for refinance?

  4. I inherited some personal effects such as furniture and jewlery. Since I am married, do those items become community property since we will both be using them in our home?

    Thanks

  5. Clayton Chambers says:

    you stated that “Dividends, interest, and capital gain earned on community property” are community property. But what about Dividends, and interest on Separate property?

    For instance, if someone inherits a stock portfolio, are the dividends separate or community?

    Thanks!

    • Dividends, interests, rent, and other income derived from separate property of a spouse is classified as community property in Texas. Capital gain on separate property is characterized as separate property.

  6. S.J.Moore says:

    I purchased a home during my marriage. The sales contract lists me as the buyer — sole and separate. The money for this purchase came from my separate bank account and from a large gift from my husband. Now, my husband has passed away and his kids are claiming 1/2 of my house as community property. My husband always kept our accounts and all business transactions separate. Do his kids have a legitimate claim? Thanks

    • Property acquired during a marriage is presumed to be community except of acquired by gift devise or descent. If funds used to purchase the real property were exclusively separate property (funds acquired before marriage and/or funds obtained by gift or inheritance), then the real property purchased with those funds should remain separate property. Please contact an attorney in your area to analyze the facts of your situation and make recommendations on how to proceed.

      • What if your husband built the house before we were married but paid it off with his 401k after we were married for 6 years? What happens then? HELP! I am so confused.

      • Texas subscribes to the inception of title rule, which bases the property’s character on the time and manner in which a person first acquires an interest in the property. If a home is purchased before marriage, then it would be characterized at separate property. However, a person may have a claim for reimbursement if separate or community funds are used to benefit the spouse’s separate property.

  7. RA Milliorn says:

    Is the income from separate property or community property?

  8. My husband had 3 separate bank accounts prior to our marriage. During our marriage he has saved $10k. Will this be considered community property?

  9. Can a property/home purchased during a marriage be sole and separate if the spouse relinquishes their rights in Texas? Is this possible?

  10. Scott M says:

    Is the money received from being the beneficiary of a life insurance policy considered inheritance and would it be separate or community property?

  11. Fay Horton says:

    My husband and I had property given to us by my mother. He has died. Is the property mine solely or do my kids have claim to part of it?

  12. JoAnne Dugart says:

    Are RMDs (Required Minimum Distributions) from a non-spouse inherited IRA community property?

  13. 1. Is it possible to convert a community property to separate property by some legal proceeding?

    2. Is it required to give power of attorney / affidavit / agreement paper by wife, when husband want to sell the community property which he purchased with his name only?

  14. My husband received property in a trust left by his dad. If my husband was to die without a will, would this property automatically go to me his wife? We do have a daughter together.

    • Trust provisions will dictate how property is distributed after the beneficiary dies. Often, the language of the trust will provide that any remaining trust property will be distributed to the beneficiary’s descendants after the beneficiary dies, although it may name another beneficiary. Additionally, the trust provisions may give the beneficiary a power to appoint trust property to another beneficiary.

  15. George Kim says:

    Will my salary and capital gain from sale of my stock bought with my salary while separated (physically separated but legally married) be considered community property?

    • Capital gain on separate property, such as appreciated stock, is generally characterized as separate property, while income earned during marriage is generally characterized as community property. Please consult with a family law attorney regarding your individual case.

  16. Loretta yeverino says:

    My question is, my mother had property before marriage, then married, and shortly after passed away with no will. Who does the properrty belong to the new husband or the children in the state of Texas?

  17. Austin Tate says:

    My wife and I both bought our home before we were married. We are both on the mortgage and the deed of the house. We were married less than 6 months after closing on the house together. Separate or community property?

    • Texas subscribes to the inception of title rule. Character is assigned at the time a person first acquires an interest in property. If that happened before marriage, the property would be separate property of each spouse.

  18. Shannon Stirling says:

    My mother recently passed away with no will. She purchased a house 4 years ago with her boyfriend. They were not married. What does Texas law state about co-owning property without marriage? Who does the house belong to (her children or the boyfriend)?
    Thanks!

    • Please accept my condolences for your loss. Generally co-owners of a property will each own a 1/2 interest in the property. Unless there is a right of survivorship created, the deceased person’s 1/2 interest would pass according to the deceased person’s Will or through the intestacy statutes.

  19. Annette Martinez says:

    I inherited a small house from my dad. I’m planning on getting married. I’m just wondering if the property will become his when we get married and when I die will it go to my children or him?

    • Property acquired before a marriage and during the marriage by gift, devise or descent is characterized as separate property. When a married person dies without a Will leaving children from another marriage, the surviving spouse is entitled to only a life estate in one-third of that property. The remainder is inherited outright by the deceased spouse’s children in equal shares.

      That being said, certain constitutional protections are available for surviving spouses in Texas. A surviving spouse is entitled to a life estate in homestead property and cannot be forced to sell her property as long as she occupies and uses it.

  20. If my husband put a down payment on the house before marriage but paid off the house once married is it community or separate property?

    • Whether property is characterized as separate or community is fixed at the “inception of title.” If acquired before marriage, the property would be separate. The fact that community funds are spent to improve or payoff separate property may give rise to a claim for reimbursement, but doesn’t change the classification of the property.

  21. My mother passed away and had no will. When she bought her home in 2006 she was not married. She married a year before she passed in 2012. Does the home go to her spouse or to me and my siblings?

    • Property owned before marriage is characterized as property. According to the intestacy statutes, a surviving spouse is entitled to a life estate (the right to use the property until his or her death) in one-third of separate real property. The rest is inherited outright by the children of the deceased spouse. However, certain constitutional protections are available for surviving spouses in Texas if the property is the homestead. A surviving spouse is entitled to a life estate in the homestead and cannot be forced to sell the property as long as he or she occupies and uses it.

  22. If your spouse bought a house before marriage and wants to sell it after marriage does the other spouse have to sign off on it to be sold since it is separate property?

    • Even when the property is classified as separate property, if the property is the couple’s homestead, spousal consent will likely be required for the sale.

  23. So i recieved an inhertance when my father passed. I have been married for 9 years and plan on buying a house. The house will be paid fully with my inheritance and nothing else. The realtor has both mine and my husbands names on the contract. Would the house be community property being that the house is being paid in full with my inhertance? If we were to get divorced would he be able to fight me for the house even though he didnt pay anything on it? And what would i need to have him sign so that he cant.He said he will sign something saying the house is mine alone.

    • Thanks for your question. I recommend that you engage the services of a family lawyer assist you with a marital property agreement. If you do not, and purchase the home, with your husband’s name added to the deed, one could argue that you intended to make a gift of half the property to him. A marital property agreement would allow you and your spouse to clarify your respective property rights and clearly define what will happen with the property if you divorce.

  24. Is my 401K considered community property?

  25. If I sell my real separate property, are the proceeds separate or community? Also, If I use those proceeds are used to purchase real property in Louisiana, would it be separate or community property? If any of this becomes community through the transactions, is there any legal documentation such as a “post nup” that could be executed to keep the property separate? Thanks!

    • Property retains the classification as separate or community regardless of whether it is converted to cash or back again. So for example, if one sells a home that was separate property, the proceeds from that home will be separate even though the property was sold when the owner was married. A post-nuptial agreement provides added peace of mind.

  26. What if the house was purchased before marriage (financed), at the time of marriage the house was in bad shape and during our marriage we have made lots of upgrades and increasing significantly the value of the property while also making payments on the mortgage together. If my spouse dies, would the house still be considered as separate property and I would be entitled to only 1/3 of the house and his children to the 2/3?

    • Whether property is characterized as separate or community is fixed at the “inception of title.” If acquired before marriage, the property would be separate. The fact that community funds are spent to improve or payoff separate property may give rise to a claim for reimbursement, but doesn’t change the classification of the property.

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