One of the central questions in almost every divorce in Texas is the division of the couple’s property, both tangible and intangible. Texas is one of only nine states that use a “community property“ system to answer this question.
The basic rule is fairly simple: Absent a valid and enforceable prenuptial agreement, community property is any asset that was acquired during the marriage. Community property is deemed to be owned by the spouses jointly, and each of them is entitled to share equitably in the marital estate. Property that is not community property is referred to as “separate property” and remains the property of the spouse who acquired it.
Classifying assets as either community property or separate property can cause unexpected disagreements in dividing the marital estate. Community property is all property that is acquired by one or both spouses during the marriage. Separate property is property that one spouse:
- Owned before the marriage;
- Acquired during the marriage by gift, devise or descent; or
- Recovered for personal injuries suffered during the marriage.
The balance of the marital estate is community property and will be divided by the court in a manner that is fair to both parties and to any children they share. Appreciation during the marriage in the value of an asset, such as corporate stock or a work of art, may cause special problems in classifying the income. Also, the benefits under a retirement plan or 401(k) plan may be considered community property, depending upon the length of the marriage.