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Important property division issues: classifying property and the 50-50 presumption

We’ve previously spoken on this blog about the two general approaches used by state courts when dividing property in divorce. As we’ve noted, a small number of states use the approach known as community property, which in some states involves a presumption of 50 percent ownership of the marital estate for each party. Equitable distribution, by contrast, does not have a 50 percent ownership presumption, but seeks to award property in a way deemed fair under the circumstances.

A couple points we wanted to touch on in this and our next post are how Texas courts determine what constitutes community property as opposed to separate property, and the default rules courts use when dividing property. These are important issues not only for couples preparing for and navigating property division in divorce, but also for couples who would like to take control of property division by entering in a prenuptial agreement. These agreements can be used not only to set the terms for the disposition of property in the event of divorce, but also to redefine how property is classified for purposes of property division. 

First of all, Texas law defines separate property as any property owned or claimed by a spouse prior to marriage, property acquired by “gift, devise or descent” during the marriage, and any awards or settlements for personal injuries sustained during the marriage, minus compensation for lost earning capacity during the marriage. Community property, on the other hand, is any property acquired by either spouse during the marriage.

Texas courts presume that any property possessed by either spouse on the dissolution of their marriage is community property, and a party who wishes to establish assets as separate property must provide clear and convincing evidence in support of this contention, which is stricter than the ordinary civil standard.

In our next post, we’ll continue this discussion by looking at the rules courts use in dividing the marital estate.

Source: Texas Family Code Sec. 3

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