The difference between community and separate property is too complex and multifaceted to explain in one article. The purpose of this article is to summarize the general concepts regarding marital property and to address some common misunderstandings.
The reason why it’s important to have a good general understanding of marital property issues is because community property can be divided up by a divorce court while separate property can not. As a side note, community property will be divided in a “just and right” manner which is not necessarily a fifty-fifty split.
The general rule in Texas (with exceptions) is all property is community property except property acquired before marriage, inherited property or gifts. Easy enough to say the furniture you bought while you were single is your separate property and the house you bought after marriage is community property. But what if you owned a house before marriage and rented it out during marriage? Would you say the rent was community property or separate property?
The answer is the house is separate property but the rental income is community property. This rule is generally true for all property that produced income or a profit except for (among other types) oil and gas well royalty which remains separate.
Other things to keep in mind are assets that are made up of both community and separate property, such as bank accounts and 401ks owned before and during the marriage. The separate property amounts are not commingled to the point of non-existence, but it can be difficult to prove their separate character.
For example, if your bank account balance is $100,000 on the date of divorce, the court will consider all of it community property unless you can “trace” through admissible evidence that the balance before marriage was $60,000. This is most commonly done through showing detailed account records which sounds easy but can be difficult for spouses who have been married for decades. If the property can’t be traced, then the $100,000 will be divided up by the court whereas, if the $60,000 can be traced by “clear and convincing” evidence, then the court will only divide up $40,000 of the bank account.
Again, whole treatises and libraries have been dedicated to this subject. This article is intended to generally summarize some basic Texas marital property concepts. If the article makes you wonder about your situation, please don’t hesitate to contact me to discuss it further.