In the United States there are two types of property regimes used to determine the property rights of spouses in a marriage. Most states use English common law principles to determine property rights but nine states, including Texas, adopted community property principles as a basis marital property rights. Community property concepts are derived from Spanish civil law.
Most states adopting community property as the basis for determining marital property rights were heavily influenced by the Spanish including California, Nevada, Arizona, New Mexico, Texas, and Louisiana. However, Washington State, Idaho and Wisconsin also use community property to determine property rights.
Community property rights may vary from state to state but all have the basic premise that property acquired during marriage is presumed to be jointly owned community property in which each spouse has equal ownership.
This discussion will be based solely on Texas law and community property rights in Texas. We will cover four basic community property topics.
- The two classes of marital property: separate property and community property;
- The presumption that property acquired during marriage is community property;
- Income earned during marriage is community property; and
- Management of community property.
Classes of Marital Property.
Community property is defined in Texas as all property acquired during marriage which is not community property. The Texas constitution defines separate property as “All property, both real and personal, of a spouse owned or claimed before marriage, and that acquired afterward by gift, devise or descent, shall be the separate property of that spouse”. This means that all property owned before marriage and all property received by gift or inheritance during marriage is separate property. All other property acquired during marriage is community property and is jointly owned by both spouses.
Presumption of Community Property.
There is no requirement that a spouse prove that property is community property. It is presumed to be community and jointly owned by both spouses unless a spouse can prove that it is separate property. It makes no difference whose name property is held in. If Spouse A acquired an asset during marriage and placed it only in his name, it is still community property and is jointly owned.
Separate property can mutate and become community property if the spouse claiming that it is separate cannot prove that it is separate.
Income Earned During Marriage Is Community Property.
Income from all sources earned during marriage is community property. Half of the salary earned by each spouse is owned by the other spouse. It is irrelevant that the salary is paid to only one spouse.
Income earned from investments is community property, even if the asset producing the income is separate property. For instance, if one spouse owns stock in Company A which pays a dividend each year the dividend is community property. If the dividend is reinvested in the stock of Company A, at some point it will not be possible to prove which stock was originally owned as separate property and which stock was purchased from dividends and is community property. When the spouse claiming that stock in Company A is separate property cannot prove which stock is separate and which is community, the stock becomes community property.
Management of Community Property.
Each spouse has equal management rights in community property unless the parties agree that only one spouse will manage certain property or unless the property is classified as “special community property”.
Personal earnings, income from separate property, personal injury awards, and property subject to only one spouse’s control, such as community property held in only one spouse’s name is deemed to be special community property and subject to management by only one spouse.
Marital property rights in Texas can be complex. The foregoing is intended only as a primer and should not be relied upon when making decisions regarding property rights. Consult with competent legal counsel before deciding.