When individuals with a high net worth marry, they often bring significant separate assets to the marriage. When marriages with complex estates end, there may be disputes over whether property is community property or the separate property of one of the spouses. The trial court in a divorce must divide the community estate of the parties in a just and right manner. The trial court generally may not divest a spouse of their separate property by awarding it in whole or in part to the other spouse. Community property is the property, other than separate property, acquired by either spouse during the marriage. Tex. Fam. Code § 3.002. Separate property includes property the spouse owned before the marriage and property gifted, devised, or descended to the spouse during the marriage. Tex. Fam. Code § 3.001. Texas law has a rebuttable presumption that property possessed by either spouse at the time of the divorce is community property. Tex. Fam. Code § 3.003. The spouse claiming property is separate has the burden of proving the property’s character by clear and convincing evidence. In a recent case, a husband appealed a property division he claimed improperly divested him of his separate property.
The Property
The parties got married in 2008. The wife petitioned for divorce in 2021 and subsequently amended her complaint to allege adultery. The primary issue at trial was the characterization of a particular piece of real property.
According to the appeals court’s opinion, the husband’s parents gave him a tract of land in 1995. The wife testified it was her understanding the husband’s parents had given the property to him as a gift in 1995. The husband testified that he had a house moved onto the land the same year.
The parties started living together on the property in 2008 and got married that December. They refinanced the mortgage on the property to get a lower rate in 2019. The wife stated they made improvements to the property after she moved in. She said the husband paid the mortgage and for some of the improvements with community funds and she had paid for part of the improvements with her retirement funds. The property was their primary residence until they separate.
The husband also testified he was given the property and moved a house onto it in 1995. He said they refinanced the property in 2019, but he did not gift or convey any interest in the property to his wife in the process.
The wife’s attorney argued she should be reimbursed for her contributions to the improvements and additions to the property, as well as her contribution to the purchase of other property.
The final divorce decree ordered the husband to pay $212,500 for her interest in the property within 30 days. She was to execute a special warranty deed conveying her interest in the property to the husband. If the husband failed to timely pay, the property was to be sold with the net proceeds going 60% to the wife and 40% to the husband.
The court characterized the property as community property and included it in the property division.
The Husband’s Appeal
The husband appealed, arguing the trial court erred in divesting him of his separate property by finding his wife had an interest in the property and ordering him to pay her for that interest.
The evidence showed the husband obtained the property by gift and moved a house onto it over 10 years before the marriage. The appeals court concluded nothing that happened during the marriage converted the property to community property. Although there were improvements to the property during the marriage, pursuant to Texas case law, improvements made to separate property during a marriage are also separate property. The appeals court also concluded, based on Texas case law, that neither refinancing the property with a loan obtained by both parties nor paying the mortgage from community funds transformed the character of the property either.
The appeals court concluded the property was separate property at inception and had not been transformed to separate property during the marriage. The trial court erred in characterizing it as community property and awarding a share of it. Because the court had improperly divested the husband of his separate property, the property division was reversed and remanded to the trial court.
Call a Knowledgeable Dallas Divorce Law
Separate property can be a contentious issue in divorces involving complex estates where characterization the parties’ assets has a large effect on property division. If you are about to enter a marriage with significant assets, the attorneys at McClure Law Group can review your circumstances and advise you on protecting your assets. If you are considering divorce with a complex estate where the characterization of assets may be an issue, an experienced Texas family law attorney can help you fight for your assets. Set up a consultation with us at 214.692.8200.