Community Property vs. Separate Property

What is Yours, Mine, and Ours?

property.jpgCommunity property is all property that was acquired during the marriage which you cannot establish as separate through tracing or showing it was a gift or inheritance. Community Property will generally be divided equally (50-50) by the court if the parties are not able to come to an agreement. Note however, the Court may exercise it’s discretion to vary from the 50-50 split. Common reasons to vary from the 50-50 split is to compensate one party for the other´s wrong doing, to equalize future interest (such as when one party gets an ongoing business concern), or when the Court determines variance would just be fair.When a single person buys or acquires property there is no doubt that the property in question belongs to that person, however when a married person buys or acquires property there is a presumption it is community property. To put this into perspective, 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 the marriage.

A court cannot divest a spouse of their separate property. Therefore, once a court determines that a particular piece of property is separate property, then it must set that property aside to the separate property owner. The burden is upon a spouse to prove that property is his or her separate property by clear and convincing evidence and if the spouse does not meet this burden the Court will consider the property community property subject to division.

As a practical matter, if the court has two people before it, with the same educational background, earning the same income, and having the same opportunities in the future, and no children, the court will divide the community estate of the parties 50/50, however, property awards favoring one party up to 90% have been upheld by the appellate courts in Texas. As more facts favor one individual, then the court has a tendency to award that individual a greater percentage of the community property. For example, if the wife is clearly at fault in causing the marriage to break up, is young, and in good health, and earning substantial income while the husband has only a high school diploma and suffers from deteriorating health – the husband could expect to receive a substantially greater portion of the community property than the wife. Likewise, a wife who abandoned her education to support her husband through medical school before she became a stay-at-home mom can expect a larger share of the estate.

It is not uncommon for one spouse to begin the process demanding they get 60%, 70%, or 75% of the community property; because they believe that the other party was at fault in the breakup of the marriage. This approach makes it very difficult to settle a case without trial and in many cases, that party is very dissappointed at trial. It is safe to assume the other spouse will NOT simply admit fault and usually the other spouse does not believe that he or she was at fault in the breakup of the marriage, or even if they were. More important is that the Judge may not, and generally does not place the same degree of emphasis upon one particular issue as the complaining spouse.

To put this in perspective, I was in the courtroom one day waiting to talk to the Judge about local politics (a purely personal visit) so I had the rare opportunity to simply watch and listen to another case. The parties were fighting vehemently and it was obvious neither side was willing to concede. After the arguments were over and the Judge had issued his ruling I approached to talk to the Judge who politely but sternly stated “I hear cases where a child has been raped or beaten to death and those two think I give a rat about whether or not the child is in a car seat.” While that case was primarily about custody, the point is the same. The Judge has heard it all. He/She is not impressed but at the same time, they are not shocked.

In a property division case, one party may clearly be at fault in the breakup of the marriage, but the Judge also has to consider present earning ability, future earning ability, educational background of the parties, etc. Finally, property has an intrinsic value to some spouses. As an example: I have a collection of baseball cards from 1951. There are 106 cards divided into two series (series 1 has red backs, and series 2 has blue backs). To my wife, these are cardboard junk of no value. A collector would assess a “book value” but I would never agree to sell the cards for the published “book value” because they are worth more to me. Now, if the Judge also collects baseball cards, he may assess the value closer to my intrinsic price, whereas a Judge that thinks they are junk . . . .

Property valuation is one of the key reasons the vast majority of cases do not go to trial. If you settle the case you can decide what property you want most and trade accordingly. In this manner you decide what you can live with. If you let the Judge decide, the Judge will tell you what you are going to live with. Accordingly, whebn evaluating any settlement, the parties should take into account all of the factors that the court is going to take into account, as well as the knowledge of what is important to the other spouse (a factor that may or may not be obvisous to the Judge) and negotiate to get what is important to you, even if it means getting less than half of the total estate. For example, if one party particularly wants the house, they should probably be willing to accept a lower percentage of the community estate in a settlement in order to make certain they get the house. There is absolutely no guarantee that the court will award a person the house. The court may very well decide that it would be better to sell the house, or award the house to the other spouse.