If you’re on the road to divorce, you probably have questions about how your marital assets and debts will be divided and reasonably so. If you received an inheritance during your marriage or if you anticipate one in the near future, you’re probably wondering if you’ll have to split it with your spouse 50/50 under Texas’ community property laws.
In the United States, we have two methods for dividing marital property in a divorce: equitable distribution and community property. Texas is one of a handful of states that follows the community property model.
Under Texas’ community property laws, both spouses have a 50% interest in the marital estate. Meaning, each spouse is entitled to half of all the income, assets and property acquired during the course of the marriage, regardless of who earned the money or which spouse’s name is on the title. However, only “community property” or marital assets are divided; separate property is not subject to division in a Texas divorce.
Are Inheritances Separate Property?
Whenever a divorce action is commenced, the first task is to determine which property is community property and which property is separate. Separate property includes assets owned prior to the marriage and gifts and inheritances received by one spouse alone before or during the marriage.
Generally, inheritances received during a marriage in one spouse’s name are separate property and not subject to division, however, if an inheritance is commingled with marital funds, it can lose its separate status.
For instance, let’s say that “Jack” received a $150,000 inheritance when his mother passed away. Not anticipating a divorce, Jack deposited the inheritance in the joint bank account he held with his wife. Jack then proceeded to use the money to pay off the couple’s credit cards and to buy the family a new truck. Since Jack commingled his inheritance with marital funds, it can now be considered “community property” and therefore it can be divided in his divorce.
Same goes for paying off marital debt. If a spouse receives an inheritance during their marriage and they use those funds to pay off marital debt or renovate the marital residence, it is now commingled and the funds used could be counted as a community asset for the sake of the divorce settlement.
Our advice is to keep inheritances entirely separate. This means place them in a bank account with only your name on it. And be aware that if you use an inheritance to purchase marital property or pay off marital debt, those funds can lose their separate status.
To learn more about dividing property under the state’s community property laws, don’t hesitate to contact the Law Firm of Johnson & Gaskill PLLC.