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Is Inheritance Community Property?

Texas is a Community Property Jurisdiction

It is presumed in Texas that all property, whether an asset or debt, that is owned by a married couple is community property. That presumption is rebuttable, but it shifts the burden to prove the existence of separate property to the spouse making such allegation by clear and convincing evidence.

In § 3.001(2) of the Texas Family Code, it states that the property acquired by the spouse during marriage by gift, devise, or descent is a spouse’s separate property. However, it also states in § 3.003 that any property possessed by either spouse during the dissolution of the marriage is presumed to be community property. So, the simple answer is that inheritance is not community property, it is separate property. However, to show that the inheritance is separate property, as stated above, you must overcome the presumption that all property possessed by either spouse during the dissolution of marriage is community property.

It is the responsibility of the person claiming the property as separate property to prove the property’s characterization. If you inherited property through a will or through Texas inheritance laws during your marriage you will need to show that the origination of the asset(s) was the inheritance. This can be traced through documents showing what you inherited, where the money (if the inheritance was monetary in nature) was deposited and what happened to the inheritance over time, i.e. if monies were commingled with community assets. A tracing expert may be extremely helpful for you if you have an inheritance that has been commingled with community assets.  It is important to maintain accurate and thorough documentation of your separate property. Banks and other financial institutions often destroy records after seven years, so you must keep your own records.

What is Community Property in Texas?

The Texas Family Code § 3.002 states, “Community property consists of the property, other than separate property, acquired by either spouse during marriage.” It also states in § 3.003 that, “(a) Property possessed by either spouse during or on dissolution of marriage is presumed to be community property. (b) The degree of proof necessary to establish that property is separate property is clear and convincing evidence.”

Common examples of community property are:

  • the income of each spouse,
  • vehicles,
  • property,
  • investments,
  • and retirement assets that were all acquired during the marriage.

Simply stated, community property is any property owned at the time of the dissolution of marriage that cannot be proven to be separate property. Community property will be divided between spouses in a divorce.

What is Separate Property in Texas?

The Texas Family Code § 3.001 states that “A spouses separate property consists of:

  • (1) the property owned or claimed by the spouse before marriage;
  • (2) the property acquired by the spouse during marriage by gift, devise, or descent; and
  • (3) the recovery for personal injuries sustained by the spouse during marriage, except any recovery for loss of earning capacity during marriage. The characterization of this separate property will need to be maintained.

To keep your separate property as separate property you want to be careful not to commingle the separate property with community property funds and to maintain accurate documentation and statements regarding the separate property.

A will or documents from a probate proceeding can help show that property is separate. Once the inheritance has been dispersed, financial statements showing the inheritance was not commingled are essential. Documents showing your recovery from personal injury and statements showing the money remained separate would help prove the characterization of your recovery as well. 

If I have commingled funds, are they lost forever to the community? No usually. Most of the time, a forensic accountant can be brought in as an expert witness to trace the separate funds. If that tracing can establish the separate nature of the funds by clear and convincing evidence, you separate property claim should be confirmed. Separate property can also be established by agreement through a premarital or postnuptial agreement.

While property titled in one person’s name might be evidence that it is separate property, that is not conclusive. Because Texas follows the inception of title rule it will be important to determine when and how the property was acquired, even if it is only in one spouse’s name. Separate property remains with the spouse who successfully shows that it is separate property and is not divided by a court during the dissolution of a marriage.

If You are Getting an Inheritance and Want to Know if it is Separate Property or How to Protect Your Inheritance Contact Scroggins Law Group, a Texas Family Law Firm, Today

The professionals at Scroggins Law Group are made up of numerous board-certified family law specialists. Scroggins Law Group is a family law firm ready to help you protect what is yours. If you need advice regarding your inheritance or have questions about separate or community property, call Scroggins Law Group, PLLC today to set up an initial consultation with one of our expert attorneys.

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