Divorce is often one of the most stressful experiences a person can face, and dividing property can be one of the most complicated parts of the process. In Texas, property division is governed by the TEXAS FAMILY CODE, and because Texas is a community property state, the rules can be very different from those in other parts of the country. Understanding how community property works, what qualifies as separate property, and how courts decide to divide assets can help you prepare for this aspect of divorce.
Community Property: The Starting Point
Texas is one of only a handful of states that follow the community property system. Under the TEXAS FAMILY CODE, community property includes all property acquired by either spouse during the marriage.
This means that income, real estate, cars, retirement accounts, and personal property acquired during the marriage are presumed to be community property—even if only one spouse’s name is on the paycheck or the title. The law assumes that both spouses contributed to the marriage partnership, whether by earning money, maintaining the home, or supporting the family in other ways.
Examples of Community Property:
- Wages and salaries earned by either spouse during the marriage;
- A home purchased while married (even if title is only in one spouse’s name);
- Bank accounts funded during the marriage;
- Retirement benefits accrued while married (such as 401(k) contributions or pension credits); and
- Business interests acquired during the marriage.
Separate Property: The Exception
Not everything a couple owns is automatically shared. Under TEXAS FAMILY CODE certain types of property are considered separate property.
Separate property includes:
- Property owned before marriage;
- Property acquired by gift or inheritance (even during the marriage); and
- Personal injury awards, except for compensation for lost wages or medical expenses incurred during the marriage.
For example, if one spouse inherited a ranch from a grandparent during the marriage, that ranch is considered separate property and is not subject to division. However, income generated by that ranch (such as rental income) might be considered community property.
Proving Separate Property
Because Texas law presumes all property acquired during marriage is community property, the spouse claiming an asset as separate property has the burden of proof. This requires “clear and convincing evidence” (a higher standard than just “more likely than not”).
Documentation is critical here. Title records, bank statements, inheritance documents, or gift letters can help establish the separate character of property. Without sufficient proof, the court may classify the asset as community property.
How the Court Divides Community Property
Unlike some states that require a strict 50/50 split, Texas courts divide community property in a way that is “just and right” under TEXAS FAMILY CODE. This doesn’t always mean equal; it means equitable based on the circumstances.
Division of Debt
Property division doesn’t only involve assets—it also involves debts. Community debt (like credit card balances, mortgages, or car loans taken on during the marriage) is also divided in a just and right manner.
It’s important to note that while the court can assign responsibility for debts between spouses, creditors are not bound by divorce decrees. That means if a loan is in both names, the creditor can pursue either spouse for payment, regardless of what the decree says. Many people choose to refinance or pay off joint debts during divorce to avoid future complications.
Out-of-State and Complex Assets
Texas courts can divide community property located outside of Texas as long as they have jurisdiction over the spouses. They cannot directly change title to out-of-state land but can order parties to sign deeds or can offset the value in the division.
Complex assets, such as closely held businesses, retirement accounts, stock options, or real estate portfolios, often require professional valuations. In some cases, courts may order the sale of property and division of proceeds when a fair split cannot be made otherwise.
Agreements Between Spouses
Spouses can also reach their own agreements regarding property division, often through mediation or by negotiating a settlement agreement. If both sides agree, the court will usually approve the arrangement as long as it is not grossly unfair.
Additionally, premarital agreements or postmarital agreements can override default community property rules, as long as they meet legal requirements for enforceability.
Key Takeaways
- Texas is a community property state. All property acquired during the marriage is presumed to belong equally to both spouses.
- Separate property is protected. But the spouse claiming it must prove its separate character by clear and convincing evidence.
- Courts divide community property in a “just and right” manner. This does not always mean 50/50; fairness depends on each spouse’s circumstances.
- Debts are divided too. Creditors may still pursue either spouse if both names are on an account.
- Complex cases benefit from legal and financial guidance. Business interests, retirement accounts, and out-of-state property often require professional help.
Final Thoughts
Property division under the TEXAS FAMILY CODE balances the community property system with the realities of each couple’s circumstances. While the law presumes an equal partnership in marriage, it also allows judges to consider certain factors when dividing assets and debts. Because the stakes are high and the rules can be complex, consulting with Anderson Legal Group, P.C. is essential to protect your rights and ensure an equitable outcome.