What Is Community Property and When Does it Matter?
Posted on September 8, 2014
by Margie Connolly
Texas is one of eight community property law jurisdictions in the United States.
The foundation of the Texas Community Property system is found in its Constitution, which is supplemented by statutory and common law. Article XVI, Section 15 of the Constitution reads, in part, as follows: 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; and laws shall be passed more clearly defining the rights of the spouses, in relation to separate and community property….
SEPARATE PROPERTY. A spouse’s separate property consists of:
(1) the property owned or claimed by the spouse before marriage;
(2) the property acquired by the spouse during marriage by gift, devise, or descent; and
(3) the recovery for personal injuries sustained by the spouse during marriage, except any recovery for loss of earning capacity during marriage.
COMMUNITY PROPERTY. Community Property consists of the property, other than separate property, acquired by either spouse during marriage.
INCOME AND INCREASES IN VALUE. Income from both Community Property and Separate Property is Community Property, because income acquired after marriage, from whatever source, is not acquired by gift, devise or descent and thus is not Separate Property. Increases in value of Separate Property on the other hand, are not income, but are treated as simply a change in value. Thus, the sales proceeds of Separate Property are regarded as a mutation in the form of the property that does not affect the character of the property. If IBM shares are held as Separate Property, the cash dividends are income, and thus Community Property. If the stock is sold, the cash received for the value of the shares remains Separate Property.
DIVORCE OR DEATH. The character of property as Community Property or Separate Property is important in knowing how that property will be distributed in the event of death or divorce. Property that is characterized as separate will not be divided during divorce, but will remain the property of the spouse to whom it belongs. Similarly, in death, separate property of the deceased spouse will go to that spouse’s heirs or legatees, rather than to the remaining spouse.
For more information, contact your Family Law Attorney.
Margie Connolly, https://mmconnollylaw.com