Texas is one of the nine states that follow a community property regime when dividing assets in a divorce. However, separate property is typically not subject to division by the courts in a divorce.
The caveat there is that certain actions taken by one of the spouses during the marriage can effectively convert some or all of the separate property into community property. Below is one of the most common ways that separate property loses that designation in a Texas divorce.
You commingled your separate funds
Suppose your father died and left you a million dollars in his will. The behest was solely to you and not to you and your spouse. The actions you take after receiving your inheritance will determine whether you have managed to keep those funds separate and apart from the community assets or whether the money has been commingled.
Maintain a separate account for the funds
Never deposit separate funds into a joint marital bank account. That effectively nullifies the separate property status of your inherited funds and allows them to be split with your spouse should you divorce. You should also avoid doing things like paying the property taxes for your family home with those funds.
Active appreciation could affect the status
Suppose you invested some of your inheritance into a business that you owned and operated. Your spouse also contributed to the growth of your business, perhaps by entertaining your clients, working the occasional shift or running the company’s website. They could convincingly argue that they were entitled to a portion of your formerly separately owned business because it actively appreciated in value during the marriage, in part due to your spouse’s efforts.
Passive appreciation, on the other hand, is not usually considered a factor in the conversion of separate property into community property.
Clarify your position on your separate property
Good record-keeping will help you establish the status of your separate property when you divorce. Learning more about the community property regime in Texas can help prepare you when it’s time to negotiate with your soon-to-be ex-spouse.