Marital Property
George
Spring 2015
I. Texas Marital Property System
Texas Constitution
Separate Property Defined (Art. XVI §15): All property, both real and personal of the spouse owned or claimed before marriage, and that is acquired afterward by gift, devise or descent, shall be the separate property of that spouse. The legislature has the power to more clearly define these rights. (note management and liability)
v Note** amendments have removed gender based references and broadened the means of acquiring separate property
v Court Divestment: court cant divest u of ur SP. Ex. Couple buys 100K house, spouse uses ½ inheritance and ½ community property. This is a TIC and on divorce the court will sell the house and split the proceeds.
Strict adherence: there has always been strict adherence to the constitutional definition of SP.
CP is not defined in the Texas Constitution but there are 2 approaches:
v Doctrine of Onerous Title: CP is whatever is acquired by the joint efforts of H and W. [Test: was it acquired by the labor of the spouses? If yes = CP if no = SP]
NOTE: it doesn’t matter if W did nothing to help earn. The earnings are assumed to be ½ W’s
Court will not inquire into who contributed what
v Doctrine of Implied Exclusion: that which does not meet the definition of SP is CP.
Texas Jury: tx is the only state that allows a jury to decide the characterization of property (and fate of child) the judge then decides the equitable division of the property.
Gift: by constitutional and stat. definition, “as a matter of law one cannot make a gift of property to the community,” because a gift is always SP. It is impossible to make a gift to the community estate. Such a gift is owned as tenants in common when made to both spouses, or as SP of one spouse.
v Note: income from a gift is CP, unless it is a gift b/w spouses (wyly amendment)
v When the original deed recites consideration then it is not a gift.
Time of Acquisition: Texas uses time of acquisition test for determining CP, so it is determined at the time of purchase.
Rules of procedure always yield to statutes.
§ Texas Family Code
Even though the texas constitution only defines separate property, the texas family code provides a separate and community property definition.
v Separate Property § 3.001
The property owned or claim by the spouse before marriage
The property acquired by the spouse during marriage by gift, devise or descent
The recovery for personal injuries sustained by the spouse during marriage, except any recovery for the loss of earning capacity during marriage
v Community Property §3.002
Community property consists of the property, other than separate property, acquired by either spouse during marriage.
§ Community Property Presumption and Characterization
§ Presumption
property possessed by either spouse during or on the dissolution of marriage is presumed to be CP
Because the statute uses the word “possess” the CP presumption is not limited to property purchase or otherwise acquired during marriage
Upon death or divore, all property possessed by spouses is presumed to be CP
§ Rebutting the Presumption of CP
The CP presumption can only be rebutted by clear and convincing evidence that the property is SP
Property can be characterized as separate by the constitution, statute or judicial precedent
The burden to rebut is on the person claiming it is SP
Increase of Land and Livestock
**The increase (i.e., dividends, interests, rents, crops, animal progeny) from SP are CP…however the “increase” of SP does not include the increase in value of the SP—this remains the spouse’s SP
v Land: increase in value of the SP land remains the SP, but income derived from the land (produce, and rents) is CP.
So if you have sp land worth 10 k before marriage, if it subsequently goes up in value to 50 k because it is in a “desirable neighborhood, the increase of 40k is SP.
Note** has to be an increase in the value of the land, not an increase in value due to what you have put on the land
v Crops: the crops produced from land that is SP is CP. (DeBlane v. Hugh Lynch)
Crops are grown conclusively presumed to have come from the efforts of the community so CP under the doctrine of onerous title
Possible exception: timber and crops which potentially take a long time to grow are split.
v Livestock: “rule of increase” the progeny of livestock become CP, but the fathering/mothering animal remains SP, as does any increase in the value of the original livestock. (Stringfellow v. Sorrels)
Increase of the value of your SP livestock after marriage is SP
Offspring is CP, as well as any income derived from SP livestock.
o Result reached by using the implied exclusion rule
o Ex: your SP horse wins kentucky derby so win the purse, the increase in value of your horse is as result of winning the KD is your SP, but the purse is CP
v Fixtures on land follow the characterization of the land.
v Mutation of SP:
Land bought during marriage with SP money is a mutation of the SP money into SP land
Ex: if you own 10 acres of land before marriage as SP and sell 5 acres for 5K, 5K is mutation of SP land into SP money
v Lottery Ticket: if lottery ticket is bought with SP, earnings are CP. Winnings are classified as passive income
Income from SP: dividends, interest, rents and revenues from a spouse’s SP is taken as CP. (Arnold v. Leonard)
v The legislature cannot change the character of property, they must make a constitutional amendment. They can however change the rights of control and power, b/c the constitutional definition of SP gives them this power.
v In this case they used Implied Exclusion—if it not specifically listed as SP, then its CP
Exception: Wyly Amendment
o If you give a gift of income producing property to your spouse, it is presumed that you are “gifting” them the income from the property, so it will be the receiving spouses SP.
Personal Injury: recovery awarded for personal injuries sustained by either spouse (disfigurement/physical pain/sufferin
e the right of a surviving spouse to a homestead and other exempt property, as well as sever the clauses in an agreement. The homestead right can be waived as long as the agreement is not unconstitutional or against PP, and when severing, it cannot go against the main purpose of the agreement.
b. Interspousal Transfers
i. Either spouse can make a gift of a piece of their SP or a share of their CP to be the SP of the other spouse
o Whether a gift has been made is a question of face to be answered by the fact finder look to gift elements
§ Donative intent, delivery, acceptance
ii. There can be NO gifts to the community!
o Barred by the constitutional definition of SP
§ Property becomes ½ separate of W and ½ separate of H (TIC)
iii. Income producing gifts: (stocks & dividends)
o If one spouse gifts to another stock, the stocks are SP of the donee AND the income produced from the sticks is separate
§ Note: thus would not occur if the gift was from a 3rd party, in that instance the income would be CP
Old Law
§ Conversion of Property: prior to our current constitution, or the amendment of 1948, the doctrine of implied exclusion kept 2 people from making an agreement to change the character of property. In 1948, the ct allowed for partition or exchange as long as it did not prejudice pre-existing creditors.
Changing SP to CP: the only way in which SP can be changed to CP is through the sale of SP to the Community for the FMV, with the proceeds from the sale remaining SP.
Changing CP to SP: Allowed through Partition or Exchange: only spouses could partition or exchange in writing their CP held presently into SP (not future interests).
v Partition: agreement to create separate estates within a single community asset by either dividing portion into 2 and giving a portion to each separate estate, or saying that asset is held 50/50 as JT.
can partition land, property, and bank accounts. [Can avoid property from being CP by setting up agreements to partition every year]
v Exchange: can only exchange that which exists at the time of exchange. Not which could be acquired in the future [Community interest exchanged for other community interest]
v Agreements: mere agreement to change character of property is not enough b/c it is determined at time of acquisition (Kellet v. Trice). Additionally, mere agreement to partition and exchange is not enough, must be in writing. A contract clause that says everything is separate even w/o Partition & Exchange is NOT valid.
