Property
Acquired Outside of Texas:
Property which is acquired outside of Texas is characterized
as either separate or community under the same conditions as if
it were in Texas. This property is also known as
“Quasi-Community Property.”
Property which would be classified as community property
if the spouses had resided in Texas at the time of its
acquisition is classified as community property. If property
acquired while the spouses were domiciled in another state would
be classified as separate property if they had resided in Texas
then that property is classified as separate property.
Martial
Property Management:
Each spouse has the sole management, control, and disposition of
his or her separate property. Each spouse also has the sole
management, control, and disposition of the community property
he/she would have owned if single. Sole management community
property includes personal earnings, revenue from separate
property, and the increase, mutation of, and revenues all
property subject to his/her sole management, control, and
disposition. Property in
which both spouses have joint control is called
joint management community property.
Specific
Examples
Community/Separate
Property
Caveat:
The following examples are subject to the characterization
rules outlined above and the particular facts of your case.
Each rule of law is subject to either exception or
argument to either maximize or minimize its effect.
Real
Property:
Appreciation in value is separate property. Rents, revenues,
and income derived from separate real property is community
property.
Stocks:
Appreciation in the value of stock and/or stock splits
is separate property. Dividends are community property.
The exception to this rule is when corporation is closely
held and corporation is really an alter-ego of the stock holder.
In this case, the stock may be impressed with the community
characteristic.
Partnership
Interests:
Generally, profits earned by the operation of a
business during marriage are community property even if the
business is separate property.
Even though partnership property is owned by the
partnership, and not by the individual partners, each
partner’s partnership interest, that is, his/her right to
receive a share of the profits and surpluses of the partnership
is subject to characterization rules. If the right to
partnership profits accrues prior to marriage, the profits are
the separate property of the partner. If the right to
partnership profits accrues during marriage, but the profits are
not distributed until after the marriage, the profits are
nevertheless community profits. If profits have been retained in
the business to meet the needs of the business, then the profits
remain partnership property whether in the form of cash in the
bank, increased inventory, or otherwise.
Trusts:
A beneficiary’s equitable interest in a trust is
characterized according to the rules of separate and community
property. If the beneficial interest is acquired before marriage
or through gift devise or descent, it will be separate property.
If the beneficial interest in a trust was funded by the Trustor
out of separate property funds then the beneficial interest is
separate property.
Oil
& Gas Mineral Interests:
Oil and gas mineral interests are separate property. Think
about it, you are removing a piece of the land every time you
sell a barrel of oil.
Employee
Benefits: It is well settled
that a spouse has a community property interest to that portion
of retirement benefits of the other spouse earned during
marriage regardless of when the retirement account was opened.
Generally, the community interest may be mathematically
ascertained by apportioning the benefit between the months in
the plan during the marriage and the total number of months
necessary for accrual and maturity.
Livestock:
The growth of livestock is separate property. Offspring is
community property. This rule is derived from a classic case
entitled Stringfellow v. Sorrells. Stringfellow
was about mules. The mules grew. The mules became more
valuable. Creditor tried to execute upon the increase in value.
Creditor lost. Stringfellow is one of the foundation
cases for the law of separate and community property.
Crops:
Whether mature or growing, crops are impressed with the
community presumption. Does not matter whether the crops are
growing on separate property land. For example, the proceeds
derived from the sale of timber growing on separate property
were community property. It is only in the instance where crops
are sold with separate property land without reservation that
crops take on the characteristic of the property.
Marital
Debt
The
liabilities of different types of marital property are governed
by Texas Family Code Section 3.202.
Separate
Property Liability: A married
person’s separate property is not subject to the liabilities
of his or her spouse unless both spouses are liable by other
rules of law. However, a spouse’s separate property is liable
if the spouse incurs a debt for necessaries or if the spouse
acts as an agent for the married person.
Agency is not created simply because the parties are
married.
Sole
Management Community Property Liability:
Each spouse's share of joint management community property is
subject to liabilities incurred by him or her before and during
marriage. A spouse's separate and sole management community
property cannot be reached to satisfy the obligation incurred by
the other spouse unless that obligation was incurred for
necessaries or by the torturous conduct of the other spouse.
Joint
Management Community Property:
Each spouse’s share of joint management community property
is subject to liabilities incurred by him/her before and during
the marriage.
Character
of Contractual Obligation: The
character of debt is fixed by the character of the contractual
obligation with the creditor. When either spouse incurs an
indebtedness during marriage and the person extending credit
does not specifically agree to look solely to the separate
estate of one of the spouses for satisfaction, the borrowing
spouse pledges community credit and whatever is acquired as a
result is community property.
Claims
of the Federal Government
Tax
Liens: The federal
government's claims for taxes is a lien in favor of the United
States on all property and rights to property, whether real or
personal, belonging to the person who is liable to pay the tax
and who neglects or refuses to pay the tax after demand.
Taxable
Estate: Under federal
law, one half of all community income is taxable to each spouse,
regardless of which spouse exercises control over the income at
issue.
Homestead:
A homestead right, though securely established and existing,
is subject to a lien for federal taxes. When a homestead is
subject to a federal tax lien, the federal government must
compensate the nondelinquent spouse for his or her homestead
interest, regardless of whether the property is community or
separate.
Sole
Management Community Property: The
federal government's claim for taxes may subject even a
spouse’s sole management community property to the other
spouse's premarital income tax liability. Be that as that may,
the Internal Revenue Service has ruled that a spouse's community
one-half interest in a joint income tax refund may not be used
to offset the separate premarital tax liability of the other
spouse, unless state law permits that interest to be reached to
satisfy premarital debts. Texas
law does not permit that interest to be reached to satisfy
premarital debts. Under Texas law, each spouse has sole
management and control over his or her personal earnings. In
addition, unless both spouses are liable by other rules of law,
community property subject to a spouse's sole management and
control is not subject to premarital liabilities of the other
spouse.
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Law Advisor Network
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