Community Property
By Earl N Jackson

In Texas, all property owned by either party to a marriage is either separate property or community property. It is a matter of constitutional import.

Texas Constitution Article 16 Section 15.

Table of Contents - Marital Property

Community Property:     ``Community property'' is all property, other than separate property, acquired during marriage.

Separate Property:     ``Separate property'' is property owned before marriage, acquired during marriage by gift, devise, descent, or received as recovery for personal injuries sustained during marriage, except for any recovery for loss of earning capacity during marriage.

Commingled Property:     “Commingled Property” is marital Property that is a mixture of both separate property and community property.

Tracing:     “Tracing” is about finding the separate property. It is about proof. Property purchased or exchanged for separate property is and remains separate property. Mutations and changes in the form of the property do not affect its character as separate or community. However, the spouse must clearly trace and identify the property.

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.