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Texas Community Property Laws Complicate Divorce-Related Sales

 

Divorce In Texas

A Texas homeowner going through a divorce recently asked us: If the marital home is in my name only, can I sell it during the divorce proceedings?

As with all matters of the heart and real estate, there is no simple answer to that question.

If you are a homeowner dissolving your marriage, it is wise to contact a real estate broker to determine the market value of your home and to start planning where you are going to live after the divorce. In light of the state’s community property and homestead protection laws, however, you should be careful about signing any sale or purchase contracts before your divorce is finalized. You should also consult your attorney.

Texas is Only One of Nine Community Property States

Often in Texas, when a divorce is filed, the judge issues a Temporary Restraining Order that, among other restrictions, will prevent you from transferring property until the divorce is final. So, selling during the divorce—regardless of title–would not be an option.

If there is no restraining order in place, caution should still be exercised.

Texas is one of only nine community property law states. The others are Arizona, California, Idaho, Louisiana, Nevada, New Mexico, Washington, and Wisconsin.

In a community property state, all property and debt—real estate and otherwise—acquired during the marriage is presumed to be community property and will be divided in the event of divorce or death. So, regardless of title, if the marital home was purchased after the wedding date, it is assumed to be jointly owned.

Therefore, in addition to needing your spouse’s permission to sell the property, you and your spouse will have to divide the equity remaining after any property debt is paid off. Further, if you purchase a new home before your agreement is finalized, your spouse could claim that home is part of the community property.

Title Does Not Always Mean Control

Texas does allow for some property to be separately owned. A property is “separate” if it was owned or claimed before marriage, acquired by a spouse by gift or inheritance, awarded in a settlement (unless it is intended as compensation for lost wages) or acquired with funds that were completely separate from the marital assets.

While you may be fully entitled to the proceeds from a sale of a separate property, the state’s homesteader rights allow your spouse to make certain claims to the property. That means the non-owning spouse will have to agree to the listing and the eventual sale of the property. The exception to this would be if the spouse had permanently abandoned the home.

Keep in mind; however, there is no legal separation in Texas.  If your spouse moves out of the home, community property laws and homesteader rights apply until you are legally divorced.

Your spouse may give you the green light to sell the property listed in your name and may promise to make no claims to the proceeds. However, make sure that all “gifts” and rights relinquishments are put in writing.

Can a Property Be Separate and Community?

Before going to divorce court, try to work things out with your spouse by coming to an amicable agreement about what is separate and what is community property and how assets will be divided, as well as when and how assets will be disposed of. The judge can then simply sign off on your agreement.

When couples cannot agree on the ownership and division of assets, simply having your name on the title of a property will not be sufficient to prove that it is separate property.

Through a time-consuming process called tracing, spouses will need to find “clear and convincing evidence” that the property is owned separately. And, in the course of that process, they sometimes find that what they thought was separate is actually community property.

For example, if you used separate funds for a portion of the purchase price, but your spouse contributed the remainder of the funds, only a portion of the property is separate, and the rest is community. If your parents gave the house to both you and your spouse as a gift, then the property is community rather than separate.

Prenuptial or post-nuptial agreements will also have an impact on whether a property is separate or community. You and your spouse may have signed an agreement that states all separate property becomes community property during the marriage.

Meanwhile, spouses who help make mortgage payments on or improvements to a separate property may be entitled to “reimbursements.”

Overall, our advice is to familiarize yourself with the law and proceed carefully and slowly. If you choose to have a judge preside over a “just and right division” of your assets and debts, you are likely to fare better if you show that you know the law and respect your spouse’s rights under the law.

If you are in the process of getting a divorced and would like to receive a cash offer on your real estate assets,  please call or email us. You can also take  30 seconds to fill our easy website form.

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