Is Texas a Community Property State?

If you’re getting married (or divorced), it may be worth your time to research whether your state uses community property laws. Unlike other states, which leave the bulk of post-divorce asset division up to the courts, community property states have stricter rules about how property is divided between former spouses.

What is community property?

Community property is any property, accounts, or debts acquired while married. The state of Texas views these items as equally owned by both parties. As a community property state, Texas adopts this interpretation of ownership when splitting up assets in a divorce. This is in contrast to non-community property states that rely on the discretion of the courts to determine property distribution.

In Texas, community property follows clear guidelines for asset division but is not always divided equally. During divorce proceedings, a judge can consider what is “just and right” based on a variety of factors before deciding how the assets will be split between the two parties. 

Community property includes any of the following acquired between the date of marriage and the date the divorce is granted:

• Physical property, including real estate and vehicles
• Retirement accounts and pensions
• Unemployment compensation
• Funds held in single or joint bank accounts

For Texas residents, community property laws will determine the split of marital property in a divorce. In some cases, it may be necessary to specifically designate separate and community property. Once all marital property has been identified, a judge will limit asset distribution to marital property and ignore separate property owned by either party.

What is separate property?

According to Texas marital property law, if property is acquired prior to getting married, the property is typically considered to be separate.

Here are some common examples of separate properties:

• Contents of a bank account that was created before the marriage 
• A gift given to only one spouse, even if received during the marriage
• An inheritance, even if received during the marriage
• Retirement contributions from before the marriage
• Personal injury claims

Property acquired before or during the marriage can be considered separate property during the divorce if proper evidence is provided. The burden of proof is on the sole property owner to gather and provide.

This proof can come in the following forms: 

• Recorded deeds
• Purchase agreements
• Transfer agreements
• Property agreements

In complicated cases where the waters have been muddied—if, for example, separate money has been used for joint expenses—an attorney can help you navigate these questions. As long as one party can prove that an asset was appropriately kept “separate,” the asset typically will remain with them and will not be designated as community property.

How community property is divided in a Texas divorce

Texas law designates all property in a marriage as community property or marital property unless proof of separate property is presented. Community property being divided does not necessarily mean it will result in an equal split of assets.

The court will consider the “just and right” division of assets based on several factors when deciding how to divide property, including the following:

• The reason for the breakup and whether anyone was at fault
• If there are any children and which spouse will have custody
• Each spouse’s potential for future earning based on factors including health and education 
• How responsibilities were divided throughout the marriage 

This is also the case for any debts incurred throughout the marriage. Just like marital property will be divided among both parties, marital debt will also be shared.

It is important to note that for purposes of credit, both parties are liable if both names are associated with the credit account. 

How are retirement accounts handled in a divorce?

Retirement funds are also typically community property under Texas law.

Retirement benefits include: 

• Pensions
• 401(k) accounts
• Retirement savings
• Deferred savings
• IRAs

In the case of dividing up retirement assets the court may draft a document called a Qualified Domestic Relations Order (QDRO). This document ensures that a former spouse qualifies for a portion of earned retirement benefits based on the length of the marriage and several other factors.

Commingling of property in Texas

During a marriage, the status of property can change between community property and separate property in certain situations:

• If separate real property was purchased prior to the marriage but was then remortgaged, or if community funds were spent on it’s upkeep, some or all of it may be considered community property
• If a property was purchased after the marriage in only one spouse's name, it may still be community property depending on how it was funded (and other factors)
• If accounts and paychecks become commingled—for example by money being transferred into a joint account—they may be considered community property
• If an inheritance is deposited into a joint account, it may be considered community property

In the case where joint money has been spent on separate property, a reimbursement claim might be made.

How a prenuptial agreement can help

Although it can be difficult to think about divorce, preparing for the possibility can ensure both spouses begin the marriage feeling secure and protected. A prenuptial agreement is drafted and signed prior to a marriage. It’s a legally binding agreement detailing the terms of a potential future divorce, including alimony and asset division. A postnuptial agreement is a similar document entered into after the date of marriage.

Prenups and postnups can help prevent disagreements later on about how community property will be handled in the event of a divorce. In most cases, these agreements will override community property laws and will determine the separation of assets—so long as they are compliant with Texas law.

If you’re married or considering marriage, consider entering into a prenuptial or postnuptial agreement. A family law attorney can help you navigate this process ensuring the resulting document is compliant with Texas law and enforceable in the event of its necessity.

Frequently Asked Questions

Is Texas a community property state?

Yes, Texas is a community property state.

How do you demonstrate proof of separate property in a community property state?

To prove separate property you will need to furnish one or more of the following:

• Purchase agreements
• Recorded deeds
• Separate property agreements
• Private banking records 

The burden of proof is always on the party claiming the separate property.

Does Texas consider inheritance community property?

No. Because inheritance is considered a gift, it is not considered community property. However, if the inheritance has been commingled with other funds or assets, this can make the situation more complicated where it may be considered community property. A lawyer can advise on how to best handle proving sole property owned or if it is likely to be considered joint property.

What is a QDRO?

A Qualified Domestic Relations Order (QDRO) divides up a retirement plan to give each party their fair share. A court will need to issue a judgment or formally approve the future beneficiaries of the retirement plan if it is under consideration as part of the separation of assets.

Can the status of property change?

Yes, the status of separate property can be changed to community property if the assets are commingled during the marriage.