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Specialty tag(s): Characterization of Separate and Community Property, Property Division

Post-Divorce Division of Property in Texas

Kathryn J. Murphy | August 9, 2024

How Is Property Divided in a Texas Divorce?

In the event the parties do not reach an agreement regarding the division of their marital estate, the judge is obligated to weigh all of the facts and devise a “just and right” division of the assets and debts. When the judge is deciding how to divide community property in a divorce, “just and right” can mean an equal division of the community property, or it could mean an unequal division of property, depending on the circumstances. A number of factors may lead the judge to consider dividing community property disproportionately, including fault in the breakup of the marriage, the employability of the spouses, and the earning capacity of the spouses.

What Is the Difference Between Community Property and Separate Property in Texas?

How is community property divided in a divorce handled differently than separate property? To understand that, you must first possess a firm understanding of both community and separate property.

Community property is property that is acquired or created during the marriage by either spouse that is not separate property.

Separate property refers to assets that are not tied to the marriage but instead are acquired or created independently of it. Each spouse individually owns their separate property. In Texas, during a divorce, the court is legally barred from transferring ownership of one spouse’s separate property to the other. Consequently, any separate property a spouse possesses must remain with that spouse in the event of a divorce.

Separate property includes:

1. Property owned by a spouse prior to marriage
2. Property that a spouse obtained during marriage as a gift or inheritance
3. Compensation for personal injuries sustained by a spouse during the marriage, excluding any recovery for loss of earning capacity during the marriage
4. Assets that can be traced back to separate property
5. Personal injury settlements
6. Property identified as separate property in a premarital or postmarital agreement

How Is Community Property Divided in a Divorce?

A court can only divide community property, and when deciding how to divide community property in a divorce, there is a presumption that all property that either spouse possesses at the time of divorce is community property unless proven otherwise. Once all of the couple’s property is properly characterized, the judge can divide the community property between the two spouses.

Are Partnerships Separate or Community Property?

Partnership property is neither separate nor community property. A partner’s interest in the partnership (right to receive a share of partnership profits) may be separate or community property.

Under the inception of title rule, if an interest in a partnership is acquired before marriage or by gift/inheritance, that interest is separate property. Distributions of profits and income during marriage are community property.

How Are Separate and Community Property Determined in Corporations?

Three things must be assessed when determining separate and community property in a corporation:

• Inception of Title: Stock in a corporation incorporated during marriage is community property; stock acquired before marriage or acquired during marriage by gift or inheritance is separate property.
• Increase in Value: The increase in value of separate property corporate stock that is due to natural growth or market fluctuations remains separate property.
• Capitalization With Separate Property: If a spouse shows that a corporation in which they hold shares was capitalized solely with separate property, the shares will be separate property.

How Is Separate and Community Property Determined with Stocks?

• Cash Dividends: Dividends paid in cash on either separate property or community property stock during the marriage are community property.
• Stock Dividends: Dividends paid in shares of stock on separate property are separate property.
• Stock Splits: Stock splits on separate property stock are separate property.

How Is My Retirement Divided in a Divorce? Is My Retirement Separate or Community Property?

Generally, retirement benefits earned during an employee’s marriage are considered community property in the post-divorce division of property in Texas. The character of defined benefit plans is determined by principles and formulas in case law. Defined contribution plans can use tracing or subtraction methods to determine separate interests.

How Do I Protect My Separate Property in a Divorce?

Your rights concerning separate property are essential, and in Texas, these rights are protected by the state constitution. During a divorce, the court cannot deprive you of your separate property. Nonetheless, there are actions you might take that could inadvertently forfeit your separate property protections and rights.

If you want to know more about how to protect your separate property in a divorce, please watch the videos below.

Speak With a Texas Property Division Attorney

Here at Goranson Bain Ausley, our experienced and accomplished divorce attorneys will work alongside you to decide which assets from your marriage will need to be divided. Throughout the course of your divorce, our attorneys will help guide you toward achieving your financial goals.

For further details on dividing community and separate property, please reach out to Kathryn J. Murphy at 214-473-9696.

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