Property
Acquired Outside of Texas: Property
which is acquired outside of Texas is characterized as either separate or
community under the same conditions as if it were in Texas. This property
is also known as “Quasi-Community Property.”
Property which would be classified as community property if the
spouses had resided in Texas at the time of its acquisition is classified
as community property. If property acquired while the spouses were
domiciled in another state would be classified as separate property if
they had resided in Texas then that property is classified as separate
property.
Martial
Property Management:
Each spouse has the
sole management, control, and disposition of his or her separate property.
Each spouse also has the sole management, control, and disposition of the
community property he/she would have owned if single. Sole management
community property includes personal earnings, revenue from separate
property, and the increase, mutation of, and revenues all property subject
to his/her sole management, control, and disposition.
Property in which both spouses have joint control is called
joint management community property.
Specific
Examples
Community/Separate
Property
Caveat:
The following examples are subject to the characterization rules
outlined above and the particular facts of your case.
Each rule of law is subject to either exception or argument to
either maximize or minimize its effect.
Real
Property:
Appreciation in value is separate property. Rents, revenues, and income
derived from separate real property is community property.
Stocks:
Appreciation in the value of stock and/or stock splits is
separate property. Dividends are community property.
The exception to this rule is when corporation is closely held and
corporation is really an alter-ego of the stock holder. In this case, the
stock may be impressed with the community characteristic.
Partnership
Interests:
Generally, profits earned by the operation of a business during
marriage are community property even if the business is separate property.
Even though partnership property is owned by the partnership, and
not by the individual partners, each partner’s partnership interest,
that is, his/her right to receive a share of the profits and surpluses of
the partnership is subject to characterization rules. If the right to
partnership profits accrues prior to marriage, the profits are the
separate property of the partner. If the right to partnership profits
accrues during marriage, but the profits are not distributed until after
the marriage, the profits are nevertheless community profits. If profits
have been retained in the business to meet the needs of the business, then
the profits remain partnership property whether in the form of cash in the
bank, increased inventory, or otherwise.
Trusts:
A beneficiary’s equitable interest in a trust is characterized
according to the rules of separate and community property. If the
beneficial interest is acquired before marriage or through gift devise or
descent, it will be separate property. If the beneficial interest in a
trust was funded by the Trustor out of separate property funds then the
beneficial interest is separate property.
Oil
& Gas Mineral Interests:
Oil and gas mineral interests are separate property. Think about it,
you are removing a piece of the land every time you sell a barrel of oil.
Employee
Benefits:
It is well settled that a
spouse has a community property interest to that portion of retirement
benefits of the other spouse earned during marriage regardless of when the
retirement account was opened. Generally,
the community interest may be mathematically ascertained by apportioning
the benefit between the months in the plan during the marriage and the
total number of months necessary for accrual and maturity.
Livestock:
The growth of livestock is separate property. Offspring is community
property. This rule is derived from a classic case entitled Stringfellow v. Sorrells. Stringfellow
was about mules. The mules grew. The mules became more valuable.
Creditor tried to execute upon the increase in value. Creditor lost. Stringfellow
is one of the foundation cases for the law of separate and community
property.
Crops:
Whether mature or growing, crops are impressed with the community
presumption. Does not matter whether the crops are growing on separate
property land. For example, the proceeds derived from the sale of timber
growing on separate property were community property. It is only in the
instance where crops are sold with separate property land without
reservation that crops take on the characteristic of the property.
Marital
Debt
The
liabilities of different types of marital property are governed by Texas
Family Code Section 3.202.
Separate
Property Liability:
A married
person’s separate property is not subject to the liabilities of his or
her spouse unless both spouses are liable by other rules of law. However,
a spouse’s separate property is liable if the spouse incurs a debt for
necessaries or if the spouse acts as an agent for the married person.
Agency is not created simply because the parties are married.
Sole
Management Community Property Liability:
Each spouse's share of joint management community property is subject
to liabilities incurred by him or her before and during marriage. A
spouse's separate and sole management community property cannot be reached
to satisfy the obligation incurred by the other spouse unless that
obligation was incurred for necessaries or by the torturous conduct of the
other spouse.
Joint
Management Community Property: Each spouse’s share of joint management community property is subject
to liabilities incurred by him/her before and during the marriage.
Character
of Contractual Obligation:
The character of debt is fixed by the character of the contractual
obligation with the creditor. When either spouse incurs an indebtedness
during marriage and the person extending credit does not specifically
agree to look solely to the separate estate of one of the spouses for
satisfaction, the borrowing spouse pledges community credit and whatever
is acquired as a result is community property.
Claims
of the Federal Government
Tax
Liens: The federal government's claims
for taxes is a lien in favor of the United States on all property and
rights to property, whether real or personal, belonging to the person who
is liable to pay the tax and who neglects or refuses to pay the tax after
demand.
Taxable
Estate: Under federal law, one half of all community income is taxable to each
spouse, regardless of which spouse exercises control over the income at
issue.
Homestead:
A homestead right, though securely established and existing, is subject
to a lien for federal taxes. When a homestead is subject to a federal tax
lien, the federal government must compensate the nondelinquent spouse for
his or her homestead interest, regardless of whether the property is
community or separate.
Sole
Management Community Property:
The
federal government's claim for taxes may subject even a spouse’s sole
management community property to the other spouse's premarital income tax
liability. Be that as that may, the Internal Revenue Service has ruled
that a spouse's community one-half interest in a joint income tax refund
may not be used to offset the separate premarital tax liability of the
other spouse, unless state law permits that interest to be reached to
satisfy premarital debts. Texas
law does not permit that interest to be reached to satisfy premarital
debts. Under Texas law, each spouse has sole management and control over
his or her personal earnings. In addition, unless both spouses are liable
by other rules of law, community property subject to a spouse's sole
management and control is not subject to premarital liabilities of the
other spouse.
