"COMMUNITY PROPERTY" v. "SEPARATE PROPERTY" -- MINE, YOURS or OURS?
The “short” answer is as follows:
- It’s presumed community (both of yours) unless you can prove it’s separate,
- If you bought it before the date of marriage, it’s separate, and
- If it was gifted to you or you inherited it, it’s separate.
- Real estate = REAL PROPERY and everything else including jewelry, cash or stocks remains personal property
However, you still have to show up with the paperwork to prove your case! The community property presumption (that it’s always community) can be overcome. But, you have to have your “ducks in a row” and those “ducks” better be reliable documents!
A self-generated computer spreadsheet timeline created by you, while helpful, proves little –- unless perhaps your spouse has no attorney.
ESTABLISHING SEPARATE PROPERTY MAY COST YOU THOUSANDS OF DOLLARS!
Parties to a divorce pay large amounts of money to forensic accountants to trace transactions to confirm the separate property nature of one of the parties’ assets. Complications ensue almost every time.
To summarize some basic principals, note the following :
- Texas follows the “Inception of Title Rule”. Please be accurate when you discuss with your attorney whether you bought the house, for example, before or after the date of marriage. This will save your attorney time. Don’t forget: whatever saves your attorney time saves you money!
- Did you re-finance the home during the marriage? If so, that is also important info to pass along.
- Have you lost your documents from the original closing or re-financing? Have you lost your bank statements, canceled checks, etc. showing the separate property money deposited into the community property checking account?
- It can take time to order copies of these things from the bank. Do this as early on in your case as possible. Don’t assume your spouse will admit that the property, account, money or whatever belongs to you alone.
- Please remember that once your spouse talks to an attorney, he or she may develop a severe memory loss about circumstances surrounding your “inheritance” and what it was spent on!
WHO HAS TO PROVE IT?
- The person who is trying to prove that the asset is “separate” bears the burden of proof, and that standard remains by “clear and convincing evidence.” This standard is more than a mere "preponderance of the evidence" This means that if there is doubt, the benefit of the doubt will be given to the community!
- Saying it doesn’t make it so! As discussed above, you can tell the Court that something belongs to you alone –- but just because it is possible that it belongs to you alone will not be enough. Bring your proof from the bank, the executed Last Will and Testament, etc. to confirm what you are saying!
Do you need a CPA?
- There are complicated accounting theories and rules to govern accounts which contain both separate and community property deposits and withdrawals. Always do a “cost benefit analysis.” Is it worth taking the time and spending the money to prove the asset is “yours alone” -– or would it be cheaper to just “split it” and move on? If you decide that the asset is valuable enough to pursue, it's never too early to start gathering your evidence!
It remains unethical for any attorney to promise an outcome, and don’t count on your spouse to be as reasonable as I have suggested you be regarding this analysis!
Instead, expect your spouse to “fight to the death” over every asset! I’m counting on you to stay calm and clear-headed!