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Real estate purchased with personal assets deemed community property

Dear Clients and friends,

Property acquired during a marriage is generally considered “community” or “marital” property that gets divided during a divorce. Meanwhile, property a spouse brings into the marriage or receives as a personal gift or inheritance from a family member generally stays with that spouse as “separate” property.

A recent Texas case, however, provides some insight into how a court might treat property acquired during marriage with one spouse’s personal assets. It also demonstrates how easily what may initially have been separate property can transform into marital property.

In that case, a divorce court awarded three pieces of real estate to the wife in a divorce even though the husband claimed they were his separate property. The couple acquired the three properties during the marriage, but the husband argued they should be treated as his own because they were bought with funds from a personal asset trust that vested in him before the marriage began.

In awarding the properties to the wife, the trial judge emphasized that any property acquired during the marriage is presumed to be marital property unless a spouse provides convincing evidence to rebut that presumption. In this case, the judge said the husband failed to make that showing.

The Texas Court of Appeals upheld the decision. As the court pointed out, the husband admitted during the divorce trial that he deposited marital funds into that same trust, resulting in the “commingling” of personal and marital funds. He also didn’t corroborate his testimony that the properties were purchased entirely with his own funds through expert testimony or documentary evidence.

One lesson to take from this case is that if you bring separate property into your marriage, you need to keep it absolutely separate and not commingle it with marital property or you risk it becoming marital property divisible during a divorce. In addition, if you make major purchases during your marriage, you can expect them to be treated as marital property unless you can trace the funds to a court’s satisfaction.



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