What Happens To Property Owned Before Marriage

Is A House Owned Before Marriage Marital Property

Is A House Bought Before Marriage Marital Property In Texas

One of the common issues that arise in a divorce in Texas is the characterization of property. Most people know that Texas is a community property state.  When a person marries, oftentimes they have acquired an asset or assets before the date of marriage.  These assets that they owned before marriage are called separate property.

Understanding Separate Property and Community Property.

My Husband Had A House Before We Got Married

Separate property is property that was acquired or created apart from the marriage and is owned individually by each spouse.  Separate property includes:

  1. property owned by the spouse before marriage;
  2. property acquired by the spouse during the marriage as a gift or inheritance;
  3. recovery for personal injuries sustained by a spouse during marriage, except for any recovery for loss of earnings during a marriage;
  4. property that can be traced to a separate property asset;
  5. property determined to be separate property by a premarital or post marital property agreement.

Since Texas is a community property state, the property couples acquire during their marriage is presumed to be community property.   During a divorce, the community property acquired during the marriage is divided between the two parties in a fair and equitable manner; however, separate property is not divided.

There are some important Rules regarding community property and separate property:

Rule #1.  It is presumed that all property owned at the end of a marriage is community property.  A spouse who is claiming an asset as his/her separate property has the burden of showing that by clear and convincing evidence.

Rule #2.   If a spouse is claiming that an asset is separate or mixed character, that spouse has the burden of showing the source of funds used to purchase that asset were from a separate property source.  This could be from monies that they had before they were married, an inheritance, or a gift.

It is the burden of the person claiming it as separate property to prove that the asset should be considered separate property by a burden of clear and convincing evidence.  Clear and convincing evidence means “the firm belief or conviction as to the truth of the allegation sought to be established.”  It is more than the standard of a preponderance of the evidence but less than the standard required in criminal cases of reasonable doubt.   This usually means tracing of assets.

Rule #3.  Texas operates under the “Inception of Title Doctrine”, meaning that whatever character the property had (separate or community) at the time it was acquired will remain unless something else happens to affect its character.  There may be reimbursement claims if community property funds were spent on that property during the marriage.

Rule #4.   Proving a separate property claim during a divorce requires excellent record keeping.  The challenge for many divorcing couples is that parties do not maintain copies of statements and the necessary information to establish separate property by clear and convincing evidence.

Rule #5.  If you do receive a separate property inheritance, establish a separate property account for those funds and talk to a divorce attorney about the best way to handle.  You should have your financial advisor establish a “sweep” account for community interest, dividends, and income on your separate property and maintain your records.

It is not uncommon for disputes to arise as to the character or the value of an asset.  Tracing is the method to piece together the paper trail when your separate property has changed form, been exchanged, or sold during your marriage.  Tracing relies on the concept that property retains its character as separate or community property over time, even if you convert it to another form of asset or another type of asset.  For example, if you sell a house that was your separate property, the proceeds from the sale are still considered to be your separate property.   If you reinvested the proceeds from the sale of the separate property asset into another house titled in your name, that house would be your separate property, even though the residence was purchased during the marriage.

Characterization Of A House Bought Before Marriage

If I Own A House Before I Get Married In TX

Sometimes unmarried couples decide to buy a home together before they get married to take advantage of low interest rate mortgages and to avoid rising rental costs. Doing this is not always a good idea for a number of reasons. To determine whether the property is separate or community, use the following rules:

  • Houses purchased after marriage are considered community property provided community funds and community credit were used to purchase the property;
  • Houses owned before marriage, inherited houses and houses received as gifts are separate property. A house can be the separate property of one spouse or the separate property of both spouses.

Determining Whether Real Property Is Separate Or Community Property

Is A House Purchased Before Marriage Marital Property

What Happens To Property Owned Before MarriageWhether or not real property is characterized as a community or separate property is determined by the time and circumstances of the purchase.  A piece of real estate that is acquired before marriage is fairly easy to establish as separate property. Establishing the character of the property is done using the inception of title rule. Under the inception of title rule, the character of a property is determined by the time and the manner in which you first acquired an interest in the property.

How does the Inception of Title Rule Work with Real Estate?

Property Owned Before Marriage

You must first establish the date of inception of title as a first step in establishing its character. The date of inception of title is the day you first became interested in the property and the date you possessed the title of that property.  When purchasing a home, inception of title occurs on the date the earnest money contract is signed.  You establish when you acquired title to the property by obtaining the earnest money contract, a certified copy of the Warranty Deed and the settlement statement.  The day the earnest money contract is signed is not the date of completion of the purchase as that usually occurs several weeks later. The inception of title rule focuses on the date the ownership interest originated.

Premarital Real Property Is Separate Property

Marital Home Purchased Before Marriage

Any property that the parties brought with them into the marriage, or property they bought before the marriage is separate property. If the couple jointly bought real property before they married and are both named as grantees on a deed for that real property, it is considered as separate property. This means that each spouse owns half of that real property as his or her separate property.

Sometimes parties before marriage may have contributed different amounts to the down payment on the house.  A spouse can argue that they own more than half of the real property, if the amount they invested (or the down payment) in that property was not equal.  A 50/50 percent ownership occurs when each spouse invested the same amount on that property with the down payment. If one spouse invested 75 percent of the earnest money and down payment while the other party only provided 25 percent of the earnest money and down payment, a spouse can argue that a 75/25% ownership of the real property exists.

If a spouse invested 100 percent of the earnest money and down payment, then that spouse may argue that he or she owns the entire real property and may make this claim even if the deed contains the names of both spouses.  A very difficult situation arises when parties purchase real estate before the date of marriage and both parties contribute to the down payment but only one parties’ name is included in the deed, sometimes due to poor credit or credit problems.  The party with title in his or her name oftentimes claims that the other party has no ownership interest in that residence.  It is advisable to contact a divorce attorney if you are purchasing real estate before marriage to understand the legal ramifications of such purchase.  We have considerable success and experience with representing clients with separate property claims.

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