Characterization of Marital Property
Updated: Jan 31, 2022
Because Texas is a community-property state, all marital property is characterized and “separate,” “community,” or “mixed.” See Hilley v. Hilley, 342 S.W.2d 565, 567 (Tex. 1961); Gleich v. Bongio, 99 S.W.2d 881, 883 (Tex. 1937). Separate property is that which is acquired by either spouse:
before marriage—either owned or claimed, Tex. Const. art. 16 § 15; Tex. Fam. Code § 3.001(1);
by devise or decent, Tex. Const. art. 16 § 15; Tex. Fam. Code § 3.001(2); or
by a gift from a third party, Tex. Const. art. 16 § 15; Tex. Fam. Code § 3.001(2).
All marital property possessed by either spouse at the time of divorce is presumed to be community property. Tex. Fam. Code § 3.003(a). To rebut the community-property presumption, a spouse has the burden to produce clear and convincing evidence that the property in question is separate property. Pearson v. Fillingim, 332 S.W.3d 361, 363 (Tex. 2011); Goyal v. Hora, No. 03-19-00868-CV, 2021 WL 2149628 (Tex. App.—Austin 2021, no pet.) (mem. op.). This presumption can be rebutted by using the inception-of-title rule. See Welder v. Lambert, 44 S.W.281, 287 (Tex. 1898). Once the property’s character is established under the inception-of-title rule, that character will not change because of mutation in the property’s form. See Chapman v. Allen, 15 Tex. 278, 283 (1855). In such a circumstance, the party claiming that the property is separate must clearly trace the original property through all of its mutation to the particular property on hand during the marriage. See Cockerham v. Cockerham, 527 S.W.2d 162, 167 (Tex. 1975).
A court is prohibited by law from divesting a spouse of title to her separate property by awarding it to the other spouse. Cameron v. Cameron, 641 S.W.2d 210, 219–20 (Tex. 1982); Eggemeyer v. Eggemeyer, 544 S.W.2d 137, 140–41 (Tex. 1977). The prohibition against divesting a spouse of her separate property does not, however, prevent a court from selling or encumbering separate property or setting it aside for the support of a minor child. See Eggemeyer, 544 S.W.2d at 141. Further, if a court mischaracterizes separate property as community but does not divest the property from its true owner, the error is only reversible if the mischaracterization resulted in more than a de minimus effect on the just and right division of the community estate. McElwee v. McElwee, 911 S.W.2d 182, 189 (Tex. App.—Houston [1st Dist.] 1995, writ denied).
An asset may be properly deemed community property when a spouse fails to rebut the Family Code's community-property presumption. See Pearson, 332 S.W.3d at 364. When this occurs, it “is not a divestiture of separate property, but a necessary classification of property as set by the community presumption.” Id. “Mere testimony that property was purchased with separate funds, without tracing of the funds, is generally insufficient to rebut the [community property] presumption.” McElwee, 911 S.W.2d at 188. Further, when the evidence shows that separate and community property have been so commingled as to defy resegregation and identification, the community-property presumption prevails. See McKinley v. McKinley, 496 S.W.2d 540, 543 (Tex. 1973).
Gaps in account statements can make tracing evidence less than “clear and convincing.” See In re Everse, 440 S.W.3d 749, 752 (Tex. App.—Amarillo 2013, no pet.). For example, in Goyal, although the husband produced many of his statements for an account he claimed to be separate, he failed to produce statements for three months of extraordinary growth, rendering his evidence less than clear and convincing. 2021 WL 2149628, at *9.
The court only has authority to divide the parties’ estate. Tex. Fam. Code § 7.001; Morris v. Veilleux, No. 03-20-00385, 2021 WL 4341967 (Tex. App.—Austin 2021, no pet. h.) (mem. op.) (court improperly divided real property equally between parties when evidence established 1/3 interest held by one of parties’ parents); Garcia v. Garcia, No. 04-19-00796-CV, 2021 WL 2556622 (Tex. App.—San Antonio 2021, no pet.) (mem. op.) (same except parent may have owned a 50% interest).