Yours, Mine, and Ours: Estate Planning In a Community Property State

The Hegwood Law Group explains how estate planning works in a community property state.

Most laws in the United States have their roots in English Common Law. The original 13 colonies were British colonies, governed by British laws, and after the Revolution many British laws were adopted as the foundation of the new country’s legal system. As people moved West, they brought the laws they knew with them, so an Americanized version of English Common Law is the basis of most estate planning law, property law, criminal law, contract law, etc. throughout the country. 

However, as anyone who knows their Texas history may suspect, things here are a bit different. During the American Revolution, Texas was Spanish territory. The people here were therefore governed by Spanish law. As we made the shift from Spanish to Mexican, and then to an independent republic, we carried an affinity for Spanish law with us. Even today, there are state laws in Texas that are radically different from similar laws in other states because our law is Spanish-based while most other states follow English common law. (Louisiana is similar to Texas in this, except that many of its laws are French.)

One area of law that is strikingly different in Texas than in other states is our property law. Texas is one of nine states that is a community property jurisdiction. In general, this means that any property acquired by a couple during their marriage is equally owned by both spouses. The other states follow the common law, which says property belongs to the person who owns the title to it. 

Where Does Community Property Come From?

The principle of community property is derived from the Spanish Law of Castile and ultimately from Visigothic custom. It is generally viewed as being more fair to women, since a wife can take over ownership and control of her husband’s property at his death even if she is not listed as a co-owner on the title. The law assumes that spouses co-own undivided equal shares of all the property owned by either partner.

In Texas, all property owned by either member of a couple is presumed to be community property unless it is proven that the property is instead “separate property” owned by just one individual. 

Texas defines separate property by statute as:

  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;
  3. the recovery for personal injuries sustained by the spouse during marriage, except any recovery for loss of earning capacity during marriage.

A person who owns separate property can do whatever they want with it without consulting with his or her spouse. When a couple divorces, separate property is not considered in the division of assets because it already belongs to just one of the spouses. 

In the estate planning world, the distinction between community and separate property is important for two reasons. 

First, we need to make sure both types of property are transferred to the person or people the owner or owners wish upon the first spouse’s death and the second spouse’s death. For example, assume that you have a valuable piece of property on the Gulf that you inherited from your great aunt. When you die, do you want your spouse to own the property, or would you like to pass it on to your great nephew? Because you inherited it, it is your separate property, so you get to decide. 

If, however, you purchased the property after you were married, and you die, your spouse may now have sole ownership of the property since if it was community property. In this second scenario, your spouse would get to decide how to dispose of the property, unless you said in a will that you wanted to leave your one-half to your great nephew. 

The second reason the distinction between separate and community property is important in estate planning is because property that is given to someone by gift, devise, or descent is classified as separate property. This means that whenever you give someone a gift, or if you remember someone in your estate plan, the item you give them is theirs and theirs alone — even if they are married. This is important if the person you give a gift or bequest to gets divorced or they themself die and their estate plan gives the property to someone other than his or her spouse. 

Contact Our Office with Your Estate Planning Needs

This may all sound a bit complicated, but it is actually very straightforward once you get the hang of it. The lawyers at our firm have years of experience working with both community and separate property, and at the end of the day, our goal is always to help you leave your property to the loved ones you want to have it. If you are worried about what will happen to a piece of property or an item you own that you want to give to someone else, please call our Houston office to discuss your concerns with one of our experienced attorneys.

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