Community Property

Question 1

What is separate property?

Answer 1

Separate property is

• Property owned or claimed by a spouse before marriage,
• acquired by gift or inheritance during marriage,
• and any recovery for personal injuries sustained by the spouse during marriage except for loss of earning capacity during marriage.

Question 2

What is community property?

Answer 2

• Community property is any property obtained by either spouse that is not classified as separate property.
• Any property obtained during the marriage is presumed to be community property unless rebutted with clear and convincing evidence. (spousal testimony is not enough)

Question 3

How to determine if an asset is a community or separate?

Answer 3

Texas uses the “inception of title rule.” The asset is classified at the time it is acquired.

Question 4

How do you characterize comingled assets?

Answer 4

• Comingled assets can be shown as separate property through “tracing.”
• The presumption of comingled assets is that they are community property and can be rebutted with clear and convincing evidence.

Question 5

What happens when funds of one marital estate benefit another marital estate?

Answer 5

• Reimbursement is the equitable remedy when one marital estate benefits another.
• Claims may be offset against one another.
• Improvements - Reimbursement measured by the enhancement in value, not cost to improve.
• No reimbursement for:
  
  • Living expenses
  • Child support or spousal maintenance
  • Student loans or financial contributions for degrees.

Question 6

How is income from separate property classified?

Answer 6

• Income from separate property is community property.
• Spouses can agree in writing to keep separate property income separate.​​

Question 7

How is income from separate investments classified?

Answer 7

Classifications of investments:

• Cash Dividends = CP
• Stock Dividends/Splits = SP
• Capital Gains from SP = SP
• Trust income = SP (if spouse has unrestricted right to corpus, income is CP)
• Mineral interests = SP
• Animal Offspring = CP

Question 8

How is property acquired in a non-community property state classified if they move to Texas?

Answer 8

Property brought from a non-community property state is called “quasi-community property.”

• Divorce - If CP in Texas it is split as just and right division
• Death - Remains separate.

Question 9

How are debts on credit classified?

Answer 9

Debts are presumed to be community credit

Exceptions:

• Spouses’ agreement that asset is separate debt
• Credit relies on one spouse’s credit in making the decision to extend credit.

Question 10

How are gifts between spouses classified?

Answer 10

• Property from one spouse’s SP in other spouse’s name = presumed gift and other spouse’s SP.
• Property from CP in one spouse’s name presumed CP (only slight evidence necessary to prove gift)

Question 11

How is property acquired during marriage but in one spouse’s name classified?

Answer 11

If both spouses participate in the transaction it is separate property.

Question 12

How are life insurance policies classified?

Answer 12

Title is established when first payment is made

• If paid with SP then classified as SP
• If paid with CP then one-half proceeds belong to surviving spouse.

Surviving spouse may challenge the naming of another person as beneficiary of a CP owned policy as fraud.