Understanding Community Property vs. Separate Property
Texas is one of a handful of community property states, and that classification has significant consequences in divorce, death, creditor claims, and estate planning. Understanding what constitutes marital property—and how Texas law divides property into community propertyand separate property—is essential for spouses, business owners, and families alike.
This article explains the legal definitions under Texas law and how courts analyze property characterization.
The Texas Community Property Framework
Texas marital property law is governed primarily by the Texas Family Code, which establishes a strong presumption:
All property possessed by either spouse during or on dissolution of marriage is presumed to be community property.
(Tex. Fam. Code § 3.003(a))
This presumption is powerful. A spouse claiming that an asset is separate property bears the burden of proof and must establish that characterization by clear and convincing evidence.
What Is Community Property?
Legal Definition
Under Texas law, community property consists of:
“The property, other than separate property, acquired by either spouse during marriage.”
(Tex. Fam. Code § 3.002)
In practical terms, if property is acquired during the marriage, it is presumed to belong to the marital community—regardless of whose name is on the title or who earned the income.
Common Examples of Community Property
Community property typically includes:
- Wages, salaries, bonuses, and commissions earned during marriage
- Business income generated during marriage
- Real estate purchased during marriage
- Retirement benefits accrued during marriage (e.g., 401(k) contributions)
- Bank accounts funded with marital earnings
- Vehicles, investments, and personal property acquired during marriage
Importantly, intent does not controlcharacterization. Even if spouses believe something “belongs” to one spouse, Texas law applies its statutory framework unless a valid marital agreement states otherwise.
What Is Separate Property?
Legal Definition
Separate property is defined narrowly under Texas law. It includes:
- Property owned or claimed by a spouse before marriage
- Property acquired by a spouse during marriage by gift, devise, or descent
- Recovery for personal injuries sustained during marriage (excluding loss of earning capacity)
(Tex. Fam. Code § 3.001)
Only property that clearly fits within one of these categories qualifies as separate property.
Common Examples of Separate Property
Separate property may include:
- Real estate owned before marriage
- Inheritances received by one spouse
- Gifts given to one spouse individually (not to the couple)
- Personal injury settlements for pain and suffering
- Certain trust distributions, depending on trust language
However, separate property can lose its protection if it is improperly handled.
Tracing and Commingling Issues
One of the most litigated issues in Texas family law is tracing—the process of proving the origin of property claimed as separate.
Commingling
If separate property is mixed with community property (for example, depositing inherited funds into a joint account), the separate property claim may fail unless the owner can:
- Clearly trace the funds, and
- Prove their separate character by clear and convincing evidence
If tracing is impossible, Texas courts may treat the asset as community property.
Income From Separate Property
A common misconception is that income generated from separate property remains separate. Under Texas law:
Income produced by separate property during marriage is community property, unless otherwise agreed by the spouses.
For example:
- Rent from a separately owned rental property
- Dividends from separate stock holdings
- Interest earned on separate accounts
These earnings typically belong to the community.
Marital Agreements Can Change the Rules
Spouses may alter the default characterization rules through:
- Premarital agreements
- Postmarital agreements
- Partition or exchange agreements
These agreements must meet strict statutory requirements to be enforceable, but when properly drafted, they can override Texas’s default community property regime.
Why Property Characterization Matters
Correctly classifying property matters in many legal contexts, including:
- Divorce and property division
- Business ownership disputes
- Estate planning and probate
- Creditor claims
- Tax planning
Mistakes in characterization can result in unintended property division, tax exposure, or litigation.
Final Thoughts
Texas community property law is deceptively simple in concept but complex in application. The presumption that property acquired during marriage is community property is strong, and overcoming it requires careful documentation, tracing, and legal analysis.
If you are dealing with divorce, estate planning, or asset protection issues in Texas, understanding the distinction between community property and separate property is not optional—it is foundational.
At David C. Barsalou, Attorney at Law, PLLC, we help clients navigate business, family, tax, estate planning, and real estate matters ranging from document drafting to litigation with clarity and confidence. If you’d like guidance on your situation, schedule a consultation today. Call us at (713) 397-4678, email barsalou.law@gmail.com, or reach us through our Contact Page. We’re here to help you take the next step.