How Do You Keep Your Separate Property Separate?

Too many times, clients only start to think in terms of community or separate property when it is too late and they are going through a divorce. They may have had property before marriage, or received an inheritance. However, during the marriage, they have commingled the separate property with community property, and did not keep good enough records to show where the property originally came from. Unfortunately, when that person gets a divorce, it is highly likely that they will be unable to prove the separate character of their property.

Family law attorneys can be used for more than getting a client through a divorce. Indeed, a Texas divorce lawyer can help you plan to protect your separate property even before you are married. To understand how to keep your separate property separate, you probably need to know what separate property is, and how it is defined under Texas law. Here is a brief over of separate v. community property:

When two people get divorced, the Court divides the community property, but cannot divest someone of his or her separate property. In other words, if the community property consists of $1 million and one spouse has $1 million of separate property, the spouse will receive his or her $1 million of separate in addition to a just and right portion of the $1 million of community property. The Texas Family Code defines separate property as property acquired before marriage, or after marriage by gift, devise or descent. Community property is any property that is not separate property. Marital property is presumed to be community property, and separate property must be proved by clear and convincing evidence. Moreover, income from separate property generally is community property (with limited exceptions).

The community property presumption can be overcome using the inception-of-title rule, which means that a property’s character is based on the time and manner in which it was first acquired. Once the character of the property is established under the inception-of-title, the character will not change because of mutations in the property’s form, appreciation in value or because community or separate property is used to improve or complete the purchase of the property.

How can you use this introduction on Texas marital property law to help you keep your separate property separate? Let’s say that you have a retirement account on the date of marriage worth $1 million. The best way to ensure that the property remains your separate property is for you and your spouse to enter into a marital property agreement that states that the account is your separate property, as well as all income or interest on that account. To be enforceable, a marital property only needs to be in writing and signed by the parties, and is enforceable without consideration.

If your prospective spouse will not agree to sign a marital property agreement, be sure and do the following:

  1. Keep all documents from your acquisition of the property. This will help show the inception of title as described above.
  2. Meet with a financial planner who has experience with divorce. A financial planner can help you set up the account in such a way that the income is swept out annually so that there is no income in the account.
  3. Keep all account statements. This will show all transactions in the account and will help show that there is no income in the account.
  4. Do not deposit any more funds into that account after you get married. Once the character of the account is established as separate property, make sure it stays that way. If you deposit community finds into the account, the account will be commingled, containing both separate and community property.
  5. Meet with a Texas family law attorney as soon as possible. If your spouse will agree, the family law attorney can draft the agreement for you to make sure it is enforceable. If your spouse will not agree, the family law attorney can advise you as to the best way to keep your separate property separate. Don’t wait until it is too late to protect your property.

If you have more questions about separate property and how to protect it, contact Gregory S. Beane at VernerBrumley. He can be reached by phone at 214-693-6543 or by email at [email protected].

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