How Do I Protect My Separate Property in a Community Property State?

Nobody goes into a relationship expecting it to end, but statistics show that the majority of people will have multiple marriages in their lifetime. In the event of a divorce, property will be divided amongst the two spouses. How that property is divided will depend on whether it is separate or community property. 

Separate vs. Community Property

Separate property is any property owned by an individual spouse prior to marriage, or received by gift or inheritance and cannot be awarded to a spouse in a divorce. Community property is the equal ownership of assets between a married couple. In a divorce, separate property will be given to one spouse that can prove ownership, and community property will be divided amongst both spouses as per equity decided by a Judge. All assets acquired during a marriage are presumed community property. This presumption is rebuttable by evidence of the nature of the property or agreement between the spouses. 

It Is Important to Have a Plan to Keep Your Property Separate in the Event That a Divorce Occurs.

Best Ways to Keep Your Assets Separate

You can create a plan to keep your property separate before, during, or after marriage. A prenuptial agreement, or prenup, is a contract signed by two people prior to marriage. The document outlines what each spouse owns before the marriage, and the spouses agree that the property will always remain separate. Another option is to create a trust or form a corporation prior to marriage and put property into those devices. 

A postnuptial agreement, or postnup, is a contract signed by two people after entering a marriage. Married couples agree on what is each person’s separate property. The key difference between a prenup and a postnup is timing. A prenup is agreed upon before marriage, while a postnup is completed during or after marriage. Utilizing one of these devices will ensure that each spouse’s property remains separate during a divorce.

The Importance of Keeping Property Separate

For couples living in the State of Texas, it is important to understand that property acquired during a marriage will be considered community property unless the couple has set up an agreement that specifies otherwise. It is possible to go back and trace all transactions from the beginning of a marriage to determine what property is separate, but this tracing must be completed by an expert. If a plan has not been established for keeping property separate, it is critical that all documents and transactions regarding the separate property are kept from all accounts from the date of marriage until the date of divorce so that the presumption of community property can be rebutted.