Character of Property Flashcards
What can the court distribute upon dissolution?
1
Q
Marital Property
A
- Marital property is all property brought into the marriage or acquired during a marriage.
- In Texas, marital property can be characterized as community, separate or mixed. The characterization matters in a divorce.
- Marital estate: all property whether community or separate
- Community estate: all property that is community.
- Separate estate: all property that belongs individually to each spouse (or each spouse’s separate estate).
2
Q
Seperate Property
A
- Property that is acquired prior to a marriage, or created apart from the marriage, is owned individually by each spouse is separate property.
- Texas cannot divest a spouse of title to their separate property by awarding it to the other spouse in a divorce.
3
Q
**Intrinsic Seperate Property Declared by Texas Constitution or Statutes **
A
- Property acquired before marriage
- Property you inherited
- Property you were gifted
-**Elements of gift: 1. intent (at time of making gift) to make gift, 2. delivery of gift, and 3. acceptance of gift. **
-A gift made to both spouses confers an undivided one-half separate property interest in each spouse.
-Income generated during marriage by gifted property is considered community property - Property (or income arising from) gift from your spouse
- Property purchased with separate property funds and both spouses named as grantees
4
Q
Intrinsic Seperate Property Cont’d
A
- Personal injury recovery
-Exceptions: medical (which estate paid?); Loss of earnings (depends on which estates’ losses are being replaced); loss of spousal services (household & domestic services of spouse=CP); pre & post judgment interest will depend on whether interest accrued during marriage, if so, could be CP); and attorney’s fees (depends on which estate incurred fees). - Property acquired by agreement
-Partition/exchange agreements
-Right of survivorship agreements - Property acquired in another state if it would have been separate property in Texas
5
Q
Derivative Seperate Property
A
- Where the property itself is not separate property, but is designated as separate property because it derives from a separate property source.
1. Property exchanged for separate property
(ex. Spouses’ residence was acquired from husband’s son in exchange for ten-acre tract of land claimed by husband before marriage.)
2. Property acquired with separate funds
(ex. marital home purchased with money from husband’s inheritance).
3. Property acquired on separate credit
(Lender expressly agreed to look solely to the separate estate of the purchasing spouse for satisfaction of indebtedness (look to lender’s intent, not spouse’s)
6
Q
Community Property
A
- Property acquired by either spouse during the marriage. Ownership is an undivided one-half interest in the property.
- In Texas, all assets and liabilities characterized as community property, at divorce, must be divided between the parties in a “just and right” manner. Tex. Fam. Code § 7.001. This does not mean 50/50.
- Specifically, community property is:
- Property acquired during the marriage;
- Property acquired under a “conversion agreement”; and,
- Property acquired in another state if it would have been CP in Texas.
7
Q
Mixed Property
A
- Sometimes property can be “mixed” if both separate and community estates were used to acquire it.
Ex. husband and wife purchase a home with 40% of the money coming from wife’s inheritance and 60% coming from money the couple has saved during the first 5 years of their marriage. In this example, 40% of the home would be separate property while 60% would be community property (and said 60% would be divisible by the court upon divorce in a ”just and right” manner.
8
Q
Community Property States, Presumption in Texas
A
- Texas is one of nine community property states in the U.S.
-Arizona, California, Idaho, Louisiana, Nevada, New Mexico, Washington and Wisconsin are the other eight. - In Texas, there is a statutory presumption that all property (real and personal) possessed by either spouse during or upon dissolution of marriage is community property. **Tex. Fam. Code § 3.003(a). ** That means that if one spouse has separate property, they must establish it at trial by refuting the presumption.
Income incurred by each spouse from thier job, is community property
9
Q
Refuting the Presumption of Community Property
A
- The party who asserts that the property is separate property has the burden of refuting the community property presumption by a CLEAR AND CONVINCING standard.
- Most common methods for refuting the presumption are:
1. Inception of title rule; or
2. Proof of Agreement
10
Q
Inception of Title
A
- Property establishes its character at the inception of title.
- Elements are when (when title vested not received) and how it was acquired
1. If property was acquired prior to the marriage, it is separate property.
2. If property was acquired during the marriage, then we need to determine how it was acquired
-Was it a gift?
-Was it an inheritance or purchased with inherited funds? - Character at its inception survives mutations
(Ex. husband uses his inheritance to pay property taxes on CP marital home).
-Remedy is a reimbursement claim (if one estates’ funds are used to benefit another estates’ property, the estate expending funds can seek to be reimbursed).
11
Q
Tracing
A
- If property has mutated since its inception, you will need to use tracing in addition to inception of title rule to to refute the community property presumption.
- Tracing is most commonly used when:
-Property has mutated since its inception;
-Property purchased with separate funds;
-Property purchased with separate credit; or
-Property has been commingled.
12
Q
Characterization of Income
A
- Income generated from community property is community property.
- Income generated from separate property is generally community property, examples include:
-Rents, revenues, profits, interest, and other income. - Exceptions:
income from separate property gifts from one spouse to the other (remain separate); and
Royalties from separate property mineral estate
13
Q
Characterization of Spouse’s Wages
A
- Current wages can be community or separate depending on when they were earned (not paid).
- Future wages generally are not community property even if they were earned in part during the marriage.
(Ex. if work performed during marriage but still contingent on spouse’s post-marital efforts then it’s just an expectancy interest and not a property right subject to characterization (future earnings from psychiatric practice that was started during the marriage). - Bonuses—determined by when they were earned, not paid.
14
Q
Characterization of Child’s Wages
A
- Earnings of an unemancipated child or property purchased with proceeds from child’s wages, are community property and will be divided among the parents if they are joint managing conservators.
-If Sole Managing Conservator, will be provided to Sole Managing Conservator.
-If Joint Managing Conservator court can still divide among both parents or provide all to one parent. - If TDFPS is conservator and child placed in residential child-care facility, child’s earnings will belong to child.
15
Q
Federal Retirement Benefits
A
- Trickier. Look to federal statutes governing the benefits to see if they pre-empt Texas law which would prevent characterization of funds.
- Civil Service
-Retirement annuity: can be accessed after plan participant turns 62 years old. It is characterized as community property to the extent it was earned during the marriage. - Military Benefits:
-If hired before 2018, Legacy Retirement System. After 2018, member can opt for blended retirement system (annuity plus thrift savings plan). Can collect after 20 years of military service. Only “disposable retired pay” can be characterized as community property and divided by a court. Texas courts are bound by the Uniform Services Former Spouses’ Protection Act in how they can divide property and how to determine disposable retired pay.
