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

Division of Community & Separate Property in Texas Divorce

Kathryn J. Murphy | December 14, 2021

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 the facts and devise a “just and right” division of the assets and debts. 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. There are a number of factors the judge may consider in 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?

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

Separate property is property that does not owe its existence to the marriage. Rather, it is acquired or created apart from the marriage and is owned individually by each spouse. Significantly, in Texas divorces, the Court is prohibited by law from divesting a spouse of title to his or her separate property by awarding it to the other spouse. Therefore, a spouse who has separate property must be awarded such property in the divorce. Separate property includes:

  1. Property owned by a spouse before marriage;
  2. Property acquired by a spouse during the marriage as a gift or inheritance;
  3. Recovery for personal injuries sustained by a spouse during marriage, except for any recovery for loss of earning capacity during marriage;
  4. Property that can be traced to a separate property asset;
  5. Personal Injury Recoveries; and
  6. Property determined to be seperate property by a premarital or post marital agreement.

How is community property divided in a divorce?

A court can only divide community property and there is a presumption that all property that either spouse possesses at the time of divorce is community property unless proven otherwise.

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?

Below are three areas of assessment for 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 during marriage by gift/inheritance, is separate property.
  • Increase in Value — 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 community property. The character of Defined Benefit Plans are 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 Divorce?

Your rights regarding your separate property are important, and in Texas, the state constitution protects your separate property rights. A divorce court cannot take away your separate property if your marriage ends in divorce. However, you can do things, where you inadvertently lose all 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

At Goranson Bain Ausley, our experienced divorce lawyers work with you to determine what assets you acquired during your marriage that will need dividing. Throughout the divorce process, we will focus on setting you on the right path to achieve your financial goals.

For more information about division of community and separate property, contact Kathryn J. Murphy at 214-473-9696.

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