Characterizing traits is often not as simple as some of the examples above. Sometimes something that was originally your separate property can be converted into community property. How is that possible? One way to achieve this is to mix separate and communal goods. In this area of law, the details matter, not only in the preparation of the contract, but also in how the parties handle their finances and assets after the conclusion of the contract. The experienced lawyers at Orsinger, Nelson, Downing & Anderson can help you create a well-designed document and provide you with helpful tips on how to live your financial life so that the deal matters when it really matters. Texas is one of nine community-owned states in America. The others are Arizona, California, Idaho, Louisiana, New Mexico, Nevada, Washington and Wisconsin. The concept of community property has its origins in Spanish civil law and arrived in Texas via Mexico. Although it is not a community-owned state, Alaska allows couples to opt for a community property agreement. The territory of Puerto Rico allows property to be owned as communal property, as do several Native American jurisdictions. In the case of Puerto Rico, the island has been subject to Community law since its foundation by the Spanish Crown after its discovery in 1493.
There are general principles and concepts that are consistent in all States of Community ownership. For example, any property acquired or acquired in the course of a marriage is generally considered or presumed to be common property, unless it is expressly identified as property separated from a spouse.  en.wikipedia.org/wiki/File:Community_property_states.svg determine whether something is separate property from a spouse has more to do with when it was acquired than anything else. Texas law uses a distinction before and during marriage to define separated property. For example, if you own a collection of vintage baseball cards that you acquired over the course of several years while you were still single, the value of that collection would be your separate property. Section 4.102 of the Texas Family Code allows spouses to divide or exchange all or part of their community property. Community property is defined as property that is not separate property and that was acquired by one of the spouses during the marriage. See Texas Family Code Section 3.002 The Texas Family Code governs three types of matrimonial contracts: Using these examples, you can now understand how an asset can have both separate and community property. In Texas, this is called proportional ownership of property through matrimonial property. The respective property is determined by the rule of the beginning of the title. Under this rule, the nature of the asset as separated or joint property is determined at the time of acquisition of the asset.
How title is held in Texas does not determine ownership. Let`s take the following example: Suppose you inherit a sum of money from your deceased relative (separate property). You open an account only in your name and deposit the inheritance. Later in the year, your spouse will receive a substantial bonus check from their employer (community property), and as a community finance manager, it`s best to choose to deposit them into the same account that contains your inheritance money. A few months later, deduct everything but $5,000 to pay family medical bills. Before paying these bills, the account had a balance of $50,000 to $25,000 in inheritance money and a work premium of $25,000. Let`s say a few years later you get divorced and that account has been partially replenished with community income and now has a balance of $25,000. What is the share of your separate property and what is the share of your property owned by the community? If the conjugal union has something, who owns the community? Each spouse has an undivided half-interest in the conjugal union. It is undivided because it is jointly owned by both of you and neither of you can give your half without the consent and participation of your spouse, except in very limited circumstances such as a will. In recent decades, even non-community ownership states known as common law states have adopted the concept of matrimonial property, which often includes similar characteristics and equality of community property laws. In some of these States, the disposition and division of property disproportionately favoured men over women.
Ironically, many in modern community states believe that the system unfairly favors women. Suffice it to say that the ultimate goal of most States is to achieve a fair and equitable distribution of property, regardless of the sex of the parties. The second method of obtaining separate property is to “make a gift, invention or filiation.” So if someone gives you something while you`re married, it`s probably your separate property. The gift does not need to be associated with a special event such as a birthday or holiday, although such circumstances may provide further proof of the true nature of its acquisition. However, keep in mind that if you provided something in exchange for the transfer, it`s probably not a gift. In that case, the element at issue could be classified as a form of compensation or remuneration which would probably be regarded as a common good. Another potential benefit is for tax and estate planning purposes. Joint property may benefit from special “reinforced basic” treatment in the event of the death of a spouse. The parties may wish to convert a certain separate property into community property and then enter into community property with survivor rights. When spouses decide to convert separate property into common property, special procedures and formalities must be followed.
These so-called “transformation agreements” waive separate property interests that would otherwise be protected by matrimonial law and the Texas Constitution. A conversion agreement requires detailed notification to the spouse who waives his or her separate property rights; Otherwise, such an agreement may not be enforceable. If the funds have been mixed, it is assumed that the Community funds will first be withdrawn before the segregated funds. It is true that all Community funds have been withdrawn, so that further withdrawals would constitute the issuance of segregated funds. Deposits made after withdrawals to replenish the account do not restore the amount of segregated funds. On the contrary, they insure exclusively for the benefit of the community. Therefore, the amount of segregated funds in the mixed account is determined based on the lowest intermediate balance in the account, which in the example is $5,000. This may seem unfair to the interests of the spouse with the separated property, but it illustrates the potential trap of mixing with community property.
The nature of what belongs to you, your spouse or the community is not always cut and dried. The source of the funds used to purchase the asset, the manner in which the security, if any, is held, and the conduct and statements of each of you in this regard may affect its characterization. In addition, parties must comply with the legal requirements of the Texas Family Code. The mere transfer of separated property from one of the spouses to the name of the other spouse without satisfying the legal requirements is not sufficient to convert the separated property into common property […].