How Prenups Affect Texas Community Property

When it comes to marital property division in a Texas divorce, it is important to understand how the law defines a couple’s property in the first place. You may know that Texas is a “community property” state. This means that any property, aside from separate property, acquired by either spouse during the marriage is considered community property. But what does this mean in practical terms?

Community property means that each spouse has an undivided one-half interest in the property. They are equal co-owners. Since Texas law applies a presumption of community property, it does not necessarily matter how the property is actually titled. For example, if one spouse purchases a home during the marriage, it is assumed to be community property of both spouses, even if the title deed only lists one spouse as the owner.

But since there is only a presumption of community property, either spouse can try and prove that a given item of property is really their separate property. This is an important distinction when it comes to a divorce. If a Texas judge has to order a division of property, they can only divide community property. A court has no legal authority to give one spouse’s separate property to the other spouse.

Court Awards Ex-Husband Marital Home Despite Ex-Wife’s Assumption It Was Community Property

One method for overcoming the community property presumption in Texas is for the couple to sign a premarital agreement. Many prenups contain language explicitly defining certain property as separate property even though it would be otherwise classified as community property. So long as the premarital agreement itself is valid under Texas law, a court will apply a presumption of separate property as detailed in said agreement.

A recent decision from a Texas appeals court, Schaefer v. Schaefer, provides a practical illustration of how this works. This contested divorce case involved a number of legal issues. As relevant here, the husband and wife had signed a premarital agreement. The agreement listed 10 items of “separate property” that belonged to the husband. The wife had no separate property listed. The agreement further provided that all property would be treated as separate property “in the event of the parties separating, or upon the death of a party.” Furthermore, unless a piece of property was “explicitly documented” as owned by both parties, certain categories of property would not be deemed community property.

The husband sued the wife for divorce and sought to enforce this premarital agreement. The wife argued that the couple’s property acquired during the marriage should still be considered community property, however, because the language of the agreement only applied a separate-property presumption in the event of “legal separation” or death but not divorce. The trial court, and later the Court of Appeals, rejected this interpretation of the premarital agreement as “untenable.” The appellate court noted that even if “separation” did not include divorce, the parties did, in fact, separate prior to the divorce filing. So the agreement still applied.

As for the effect of the premarital agreement, the Court of Appeals said the trial judge erred in not awarding the husband the marital residence as his sole property. The wife testified she assumed the house was community property because it was bought during the marriage. But the husband introduced evidence showing he paid for the marital home using the proceeds from the sale of two other properties that were his separate property. And all of the documents pertaining to the purchase of the home–the deed, title insurance, et al.–listed the husband as the sole owner. Given the premarital agreement required “explicit” proof that any property acquired was community property, and the wife presented no evidence to rebut the husband’s documentation, the Court of Appeals said the home was the husband’s sole property.

The appellate court did, however, uphold the trial court’s finding that a hunting rifle the husband gifted to the wife was her sole property. This came down to a he said-she said disagreement. And the trial judge was entitled to resolve the conflicting testimony in the wife’s favor.

Contact League City Family Law Attorney Tad A. Nelson Today

When it comes to divorce, division or property, and premarital (or post-marital) agreements, neither party should ever make any assumptions as to their rights. Both spouses should work with their own qualified Galveston family law attorneys who can advise them as to the law and how an agreement might affect their interests in the event of a divorce. If you need advice regarding your situation, contact the Law Offices of Tad A. Nelson today to schedule a consultation.