Under the Texas Family Code, a spouses 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 marriage.
The terms “owned and claimed” as used in the Texas Family Code mean that where the right to the property accrued before marriage, the property would be separate. Inception of title occurs when a party first has a right of claim to the property by virtue of which title is finally vested. The existence or nonexistence of the marriage at the time of incipiency of the right of which title finally vests determines whether property is community or separate. Inception of title occurs when a party first has a right of claim to the property.
Under Texas Constitution, Art. XVI, Section 15, separate property is defined as all property, both real and personal, of a spouse owned or claimed before marriage, and that acquired afterward by gift, devise or descent, shall be the separate property of that spouse; and laws shall be passed more clearly defining the rights of the spouses, in relation to separate and community property; provided that persons about to marry and spouses, without the intention to defraud pre-existing creditors, may by written instrument from time to time partition between themselves all or part of their property, then existing or to be acquired, or exchange between themselves the community interest of one spouse or future spouse in any property for the community interest of the other spouse or future spouse in other community property then existing or to be acquired, whereupon the portion or interest set aside to each spouse shall be and constitute a part of the separate property and estate of such spouse or future spouse; spouses may also from time to time, by written instrument, agree between themselves that the income or property from all or part of the separate property then owned or which thereafter might be acquired by only one of them, shall be the separate property of that spouse; if one spouse makes a gift of property to the other that gift is presumed to include all income or property which might arise from that gift of property; and spouses may agree in writing that all or part of the separate property owned by either or both of them shall be the spouses’ community property.
In 1917 the Legislature defined and income from separate property to be the separate property of the owner spouse. In Arnold v. Leonard, 114 Tex. 535,273 S.W. 799 (1925), the Supreme Court held that the Legislature did not have the constitutional authority to characterize the income from separate property as the owner’s separate property. The court explained that the Legislature’s authority was limited to enacting laws regulating the management and liability of marital property, not its separate or community character. This decision strengthened the constitutional principal that the Legislature may not define what is community and separate property in a manner inconsistent with Article 16, Section 15 of the Texas Constitution.
There are numerous means by which separate property may be acquired in defiance of Article 16, Section 15, a partial list includes mutations of separate property, increases in value of separate land and personality, recovery for personal injury not measured by loss of earning power, improvements of separate land with an unascertainable amount of community funds, and United States Securities purchased with community funds.
Although such property may undergo changes or mutations, as long as it is traced and properly identified it will remain separate property.
The Texas Family Code defines community property as follows: “community property consists of the property, other than separate property, acquired by either spouse during marriage.”
Texas Family Code, Section 3.003 states that all property possessed by either spouse during or at the dissolution of the marriage is presumed to be community property and that the degree of proof necessary to establish that property is separate property, rather than community property, is clear and convincing evidence. Clear and convincing evidence is defined as that measure or degree of proof that will produce in the mind of the trier of fact a firm belief or conviction as to the truth of the allegations sought to be established. If property cannot be proved to be separate property, then it is deemed to be community property.
The Texas Family Code, Section 7.002, deals with quasi-community property and requires a court divide property wherever the property is situated, if 1) the property was acquired by either spouse while domiciled in another state and the property would have been community property if the spouse who acquired the property had been domiciled in Texas at the time of acquisition; or 2) property was acquired by either spouse in exchange for real or personal property and that property would have been community property if the spouse who acquired the property so exchanged had been domiciled in Texas at the time of the acquisition.
Getting Divorced? Here is Your Financial Checklist to Get Started.
Preparing for a Texas Divorce: Assets
Preparing for a divorce is painful no matter the circumstance. Before you get into the tangle of the Texas divorce process, you can reduce the expense, stress and conflict many people face by making sure you are prepared. Planning ahead allows you to make sound decisions and start preparing for your life post-divorce, and may also help you avoid post-divorce pitfalls. Below is a list of items you need to gather before counseling with an attorney.
1. A Listing of all Real Property, address and location, including (include time-shares and vacation properties):
1. Deeds of Trust
3. Legal Description
4. Mortgage Companies (Name, Address, Telephone Number, Account Number, Balance of Note, Monthly Payments)
5. Current fair market value
2. Cash and accounts with financial institutions (checking, savings, commercial bank accounts, credit union funds, IRA’s, CD’s, 401K’s, pension plans and any other form of retirement accounts):
1. Name of institution, address and telephone number
2. Amount in institution on date of marriage
3. Amount in institution currently
4. Account Number
5. Names on Account
3. Retirement Benefits
1. Exact name of plan
2. Address of plan administrator
5. Starting date of contributions
6. Amount in account on date of marriage
7. Amount currently in account
8. Balance of any loan against plan
4. Publicly traded stock, bonds and other securities (include securities not in a brokerage, mutual fund, or retirement account):
1. Number of shares
2. Type of securities
3. Certificate numbers
4. In possession of
5. Name of exchange which listed
6. Pledged as collateral?
7. Date acquired
8. Tax basis
9. Current market value
10. If stock (date option granted, number of shares and value per share)
5. Insurance and Annuities
1. Name of insurance company
2. Policy Number
4. Type of insurance (whole/term/universal)
5. Amount of monthly premiums
6. Date of Issue
7. Face amount
8. Cash surrender value
9. Current surrender value
10. Designated beneficiary
6. Closely held business interests:
1. Name of business
3. Type of business
4. % of ownership
5. Number of shares owned if applicable
6. Value of shares
7. Balance of accounts receivables
8. Cash flow reports
9. Balance of liabilities
10. List of company assets
7. Mineral Interests (include any property in which you own the mineral estate, separate and apart from the surface estate, such as oil and gas leases; also include royalty interests, work interests, and producing and non-producing oil and gas wells.
1. Name of mineral interest
2. Type of interest
3. County of location
4. Legal description
5. Name of producer/operator
6. Current market value
8. Motor Vehicles (including mobile homes, boats, trailers, motorcycles, recreational vehicles; exclude company owned)
5. Name on title
6. VIN Number
7. Fair Market Value
8. Name of creditor (if any), address and telephone
9. Persons listed on debt
10. Account number
11. Balance of any loan and monthly payment
12. Net Equity in vehicle
9. Money owed by spouse (including any expected federal or state income tax refund but not including receivables connected with any business)
10. Household furniture, furnishings and Fixtures
11. Electronics and computers
12. Antiques, artwork and collectibles (including works of art, paintings, tapestry, rugs, crystal, coin or stamp collections)
13. Miscellaneous sporting goods and firearms
15. Animals and livestock
16. Farming equipment
17. Club Memberships
18. Travel Award Benefits (including frequent flyer miles)
19. Safe deposit box items
20. Burial plots
21. Items in any storage facility
22. A listing of separate property (property prior to marriage, family heir looms, property gifted)
23. Listing of all liabilities (including mortgages, credit card debt, personal loans, automobile loans, etc.):
a. Name of entity, address and telephone number
b. Account number
c. Amount owed
d. Monthly payment
e. Property securing payment (if any)
f. Persons listed as liable for debt
When couples says “I do” one must be thoughtful of the potential consequences to a Small Business owner. A Small Business owner without proper preparation and/or knowledge may soon be saying “our assets” instead of “my assets”. Small Business owners should closely examine their fiduciary duties to their spouse in reference to community assets that may arise when two individuals acquire a marriage license and marry or marry by common law. A small business owner can protect his/her premarital property by keeping it under their control rather than risking community characterization.
Pre-Nuptial agreements are binding technical contracts that safe-guard an individual’s properties, monies, and business belongings in detail. These contracts may be specific, complex, and meticulous. An attorney should be consulted. The Pre-Nuptial agreement can dictate, regulate or mitigate manage next of:
- The entitlements of spousal support
- The inheritance regarding Insurance Policies
- The specific allocation of resources and properties in a Will, Trust, or Business
- The marital property claims in reference to both parties
- The ability to Own, Sell, Purchase, Rent, Mortgage, and Regulate any Separate or Community Properties
If an individual has married before a Pre-Nuptial contract is executed there is still hope and a path to take in order to insure protection of your small business. A Post-Nuptial agreement protects a Small Business owner’s property after the fact and should be utilized if required or desired. The Post-Nuptial agreement is similar to the Pre-Nuptial agreement but more care and specificity is required since some or all an individual’s assets may have taken on the attributes of community property because of the spouse’s inherent property rights after the marriage has taken place.
There are three major Ante-Nuptial agreements:
1.) Partition and Exchange Agreement: This Agreement regulates the financial allocation of a Small Business allowing monies and stock to remain separate property rather than becoming community property over time. It also separates and characterizes each spouse’s future income. The agreement allows Small Business owner’s the ability to have independent control over their business without empowering or including their spouse in decision making or management.
2.) Agreement Concerning Income from Separate Property: The principal feature of this agreement is to protect an individual’s corpus & income that exists or is produced by their Small Business. Even If there is an existing Post-Nuptial agreement that inhibits a spouse from attaining stocks or money within a specific Small Business, the actual income the Small Business produces may become community and the other spouse is entitled to their share upon dissolution of the marriage. This is tricky, for a Small Business owner is right in believing that the property and assets of the business itself is independently theirs, but he/she is wrong in the assumption that the profit made by their business is independently theirs as well. This Agreement allows a Business Owner to control, manage, and personally own all the income that is realized through his/her company. This Agreement must be signed by the owner and his/her spouse and should be as concrete as possible to avoid problems in any type of litigation process.
3.) Complex Estate Planning: Estate planning is helpful and smart. Many Post-Nuptial agreements allow independent properties to modify the community status of property to attain certain tax breaks that are applied to married couples. This may put a smile on a Small Business owner’s face for a while as he/she reaps the benefits of tax-deductions, but if a divorce occurs these tax exemptions could become proof of the existence of community property to be awarded to his/her spouse. Pre and post marital agreements may not be necessary dependent on specific situations, but if they are necessary the agreements will ensure the control of one’s business assets, income, and properties. The law was created to help ensure the protection of people’s premarital rights. If you are a Small Business owner read up on yours rights and avoid not being taken advantage of by a once loving spouse in the future.
We hear a lot about dead-beat dads, or parents who do not pay their child support obligations. Now it is time for “fathers” or men who have been paying child support for children who are not their biological children to assert their rights.
Texas has a new law, Texas SB785, which permits men who have been ordered to pay child support, without genetic testing, to request genetic testing in order to determine whether they are the genetic parent of the child.
After September 1, 2012, a man must file a petition to determine genetic parentage no later than the first anniversary of the date on which he becomes aware of facts indicating that he is not the child’s genetic father.