What Is the Difference Between Separate Property and Community Property and
How Does the Court Divide it on Divorce?
Under the Texas Family Code separate property is defined as property owned or claimed
by a spouse before marriage, property acquired by a spouse during marriage by gift or
inheritance, and recovery for personal injuries sustained by a spouse during marriage,
except any recovery for loss of earning capacity during marriage. Community property is
all property, other than separate property, which is acquired by either spouse during
marriage.
It all sounds really simple, doesn't it? It's not. There is a presumption in the law that all
property possessed by either spouse during the marriage or at the time of divorce is
community property. The burden of proof is on the spouse claiming that certain property
is his or her separate property, and the burden of proof is "clear and convincing
evidence". That is a difficult burden to meet. If there is any doubt about whether property
is community or separate the dispute will be resolved in favor of the community estate.
If, for example, Betty Sue purchases herself a red Mercedes convertible during the
marriage and at the time of divorce testifies that she used money she had before the
marriage to buy that car, the Court will still determine that the car is community property if
Betty Sue's husband, Billy Bob, claims it's community property and Betty Sue cannot
"trace" her separate funds into the car. If Betty Sue and Billy Bob have only been
married a month or two and Betty Sue had a bank account before the date of marriage
that she kept after she married and the balance hadn't changed since the marriage and
she can show a check written out of that account for the car after the marriage, she's met
her burden of proof. But what if Betty Sue and Billy Bob have been married 20 years.
And what if the account she had before the date of marriage has been closed and the
money she had in that account has been moved into various accounts through the 20
years including joint accounts with her husband. That's going to be tough.
Another rule to be aware of is that income earned during marriage on separate property
is community property. So if Billy Bob owned a house free and clear prior to the date of
marriage and he rents it out during the marriage, the rental income is community.
Assume he's been renting that house out for the whole 20 years he's been married to
Betty Sue and he's put every bit of that money in a savings account or a CD. That rental
income and all the interest earned on that rental income is community property and the
court will divide it between the parties at the time of the divorce. Poor old Billy Bob is not
going to be happy about that. Billy Bob could have avoided this result had he and Betty
Sue entered into a marital agreement providing that any income earned on their separate
property would be separate property.
What happens when one spouse owns a lot on the date of marriage and during the
marriage the couple builds a house on that lot? What happens if one spouse owns a
house prior to the date of marriage and then during the marriage the couple spends
community funds remodeling and improving the separate property house? What
happens if an older, well to do man and woman get married and after marriage they buy
a $500,000 home, each of them using $100,000 in money they had before they married
to make a $200,000 down payment and then take out a $300,000 mortgage together to
pay the balance? These convoluted hypotheticals are endless, and when you have two
spouses taking opposite positions things get interesting. When this happens, and the
spouses are unwilling to compromise, the court will have to decide what property is
community and what property is separate.
The Court will divide only the community property. The Court is prohibited from divesting
a spouse of his or her separate property. The Court is required by statute to divide the
community estate in a "just and right manner." That does not necessarily mean 50/50.
Remember, every situation is unique. This article is not intended to be a substitute for
competent legal advise from an attorney who knows your particular situation. For further
information on this topic, feel free to contact me at pcalhoun@pdq.net.