Texas Separate vs. Community Property: Know What You Own

In Texas, knowing what type of property you and your spouse own is not only important in the context of family law, it is also important for Texas estate planning and litigation. A better understanding of what type of property you own will allow you to make informed decisions about managing and protecting your property.

Separate vs. Community Property

In Texas, your separate property is anything you owned before your marriage, anything you inherit or are given personally during marriage (property acquired “by gift, devise, or descent”), and any recovery you get for your personal injuries. The Texas constitution strongly protects your separate property—no court can take your separate property to satisfy your spouse’s debts or liabilities. Anything that you own that’s not separate property is community property. Dividends and interest earned during marriage on your separate property is community property, but capital gains on separate property remain separate.

While the Texas constitution protects your separate property, the law in Texas also presumes that anything you own while you’re married is community property, regardless of when or how you got it. This means that if you want to ensure your separate property is treated as separate, you have to be able to prove that you owned it before you were married or that it was given to or inherited by you personally.

Retaining the Character of Property

The underlying value of your property retains its separate or community character even if you sell it, trade it, or otherwise change what it is. For example, if you sell a car or a house you owned before you got married, the proceeds from that sale are your separate property. If you buy another car or house with the money you get from that sale, that new car or house is also your separate property. But to ensure you can identify what property is what, it is important that you not commingle your separate property with community property. That means if you sell your separate-property car, you shouldn’t put the money you get into your joint bank account. While doing that doesn’t turn that money into community property, it makes things complicated. If you later want to make specific bequests in your estate plan, if you or your spouse gets sued, or if you get divorced, you may need to figure out the character of your and your spouse’s property. If the property is commingled, this determination requires an expensive and time-consuming process called “tracing” to determine what is separate property and what isn’t.

Why Do I Need to Know This?

Why is this information important to know? What implications does this have for a happily married couple?

Knowing what property is separate and what is community will help you and your spouse make decisions about managing your assets. As mentioned before, if you or your spouse gets sued, if you want to make specific bequests in your estate plan, or if you get divorced, determining the character of your property may be important. Determining legal ownership of commingled assets may require an extensive search or tracing involving lawyers and forensic accountants. This translates into at least several hundred if not several thousand dollars and a lot of time and effort.

If your spouse gets sued, defaults on a debt, or otherwise owes somebody money, your separate property is protected. Your spouse’s creditor can get to one half of your and your spouse’s community property assets, but cannot touch your separate property. Similarly, when writing your Texas estate plan, you and your spouse can each give one half of your community property to whomever you want, but only you can decide who gets your separate property. And in a divorce, a court can split up community property in whatever way the judge decides is “just and right,” but you will always get to keep all of your separate property.

Know what property is separate and community in your marriage. (You can even change it if you want.) It will allow you to protect and preserve not only your interests but your family’s interests as well.