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What does it mean that Texas is a community property state?

On Behalf of | Apr 13, 2022 | Divorce

Texas is one of the few states that’s a community property state. This means that all property gained during a marriage is equally owned by both spouses. Thus, when the couple divorces, the law will usually divide the property equally.

Exempt property

Property that you brought with you into the marriage is usually exempt from Texas’ equal property division law. Examples include real estate and inheritances that you had before getting married. Gains on your assets during the marriage, however, might be marital property and thus divided equally with your spouse. If you received an inheritance during the marriage, then it’s likely exempt. Personal injury settlements and gifts are usually not subject to community property law as well.

What counts as community property

All forms of income count as community property, including bonuses, overtime pay, pay for lost wages, unemployment benefits and rent from real estate. Vehicles and individual contributions to retirement accounts are also subject to equal division during a divorce. It doesn’t matter which spouse’s name is on the title of a car; the law will still include it among equal distribution of the property.

Prenup or postnup

Texas allows couples to create prenup or postnup agreements. This type of agreement overrides community property laws as long as it doesn’t break any laws regarding limitations of prenup and postnup agreements. You may determine that each spouse retains their personal investments and vehicles in their name. What you can’t do is waive a parent’s legal responsibility for paying child support. It’s also illegal to include provisions that break public policy or impose criminal penalties. You can’t make your spouse responsible for the debts of your pre-existing property as the law sees this is defrauding creditors.

Although Texas is a community property state, it’s possible for you to agree with your spouse on a different arrangement for property division. You can draft this agreement after negotiating with your partner.