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Pre- and post-marital agreements may prevent commingling

Pre- and post-marital agreements may prevent commingling

On Behalf of | Mar 5, 2022 | Marital Agreements |

Because Texas is a community property state, assets that either spouse acquires after their wedding become part of a shared marital estate known as the “community” estate.  However, property that is owned or acquired before the marriage is classified as separate property. Inheritances and gifts given during the marriage are also classified as separate property.

Some couples opt for pre-marital agreements to resolve potential issues prior to entering into their marriage. As noted by SmartAsset.com, a pre-marital agreement could protect each person’s individual assets as their separate property even after they are married.  A person should carefully consider how they handle their separate property, as commingling separate property with community property can make identifying separate property assets more difficult in the event of divorce.

How commingling separate property with community property could affect property division

Kiplinger’s Personal Finance explains how issues of commingling could relate to a spouse receiving a benefit from the other spouse’s separate property estate. Commingling property may make it harder for a court to trace the property.

At the time of divorce in Texas, all assets are presumed to be part of the community estate. The spouse claiming that an asset is separate property, bears the burden of proof to show the court that it is a part of their separate property estate by clear and convincing evidence.

In certain situations, one party’s separate property estate may be entitled to a reimbursement if funds from that spouse’s separate estate were expended on assets in the community estate. For example, if one spouse receives a large inheritance and those funds are used to pay off debt or improve the community estate, that spouse may have a reimbursement claim at the time of divorce against the community for those funds.

Real estate purchases may also create problems when dividing assets. If one spouse’s inheritance paid for all or part of an asset titled in both spouses’ names, the court may have difficulty determining each party’s interest in the asset.

Post-marital agreements may confirm separate property

SmartAsset.com notes that individuals receiving inheritances may wish to consider post-marital agreements. Like pre-marital agreements, spouses may characterize and list their separate property. The agreement may confirm assets are not part of a couple’s community estate. Agreements such as these may prevent the need for tracing or forensic accounting at the time of the divorce. It is important to consult with a family law attorney who may provide further information as how to best protect your assets.