Texas is one of the few community property states in the United States. For many people, this is worrisome. If you stand to inherit family assets, you likely have one essential question. Is inheritance community property in the Lone Star State, or does it belong solely to you?
The short answer: no, inheritance is generally not community property. Texas treats it as separate property. However, the “long” answer is a bit more complicated.
At Albin Oldner Law, we are here to answer your questions about inheritance and community property during divorce. We want you to know where you stand in these situations. Let’s take a closer look.
The Basics: Community vs. Separate Property
So, is inheritance community property? To answer that, we first must look at how Texas classifies everything you own.
- Community Property: This is the default setting. It includes almost all property acquired by either spouse during the marriage. So, income, cars and houses bought with that income are generally included.
- Separate Property: This includes property owned before the marriage. It also includes property acquired during the marriage by specific means, such as a gift or an inheritance.
In Texas, if a family member leaves you an estate, the estate generally belongs to you and only you.
When Does Inheritance Become Marital Property?
An inheritance may not always remain separate property. It can become marital property during the marriage.
When does inheritance become marital property? It usually happens in one of three ways:
1. Commingling of Funds
This is the most common way an inheritance becomes marital property. Imagine you inherit $50,000. You deposit that money into a joint savings account that you and your spouse both use for groceries and mortgage payments. Now it becomes difficult to label that money separate.
Over time, new deposits and withdrawals pile up. Soon no one can tell which money came from the inheritance and which each spouse earned. At that point, a court may rule it has all become community property.
2. Using Inheritance for Community Debts
Say you use your inheritance to pay off the mortgage on a home you both own. Or you renovate the kitchen in the house you share. Either way, you are essentially “gifting” that separate property to the marriage. You might be able to get that money back during a divorce. The asset itself, though, is no longer just yours.
3. Clear Intent and Titling
Maybe you inherit a car or a piece of land. If you change the title to include your spouse’s name, that asset is now community property.
Any of these situations can become confusing and frustrating. The family law team at Albin Oldner Law is here to guide you through them and help you distinguish between separate and community property.
Is Inheritance Marital Property? The “Income” Exception
This is where things get a little gray. The original inheritance is separate property. But the income it generates is often community property. So if you inherit a house and rent it out, the monthly rent checks can become community property. This is especially true if you deposit these checks into a joint account. That takes us back to the commingling issues we mentioned above.
How to Best Protect Your Separate Property
If you want to ensure that your inheritance remains your own, you need to be proactive. Here are several things to consider:
Keep Detailed Records
In Texas, there is a “Community Property Presumption.” The court assumes everything you own is community property until you prove otherwise. You will need clear and convincing evidence. Detailed records make that much easier:
- Keep the original will or trust documents
- Keep bank statements showing the first deposit of funds
- Keep a paper trail of every transfer
Use Separate Accounts
Do not deposit inherited cash into a joint account. Open a new account in your name only, at a different bank if possible. Use it exclusively for that inheritance.
Consider a Postnuptial Agreement
If you are already married and receive a large inheritance, you and your spouse can sign a “Partition and Exchange Agreement.” This legal document reinforces that the inheritance, and any income it produces, will remain separate property no matter how it is used.
Inheritance and Community Property in Divorce and Death
Is inheritance marital property? That question becomes most urgent during a divorce or after the death of a spouse.
In a divorce, a judge cannot take your separate property and give it to your spouse. They can only divide community property. If you can prove your inheritance is separate, you keep it.
If you die without a will, Texas law will decide how your property is split. Separate property and community property follow different rules for what your spouse and your children receive.
Do You Need Help With Divorce Law? Our Team Is Here to Help
Since every family situation is different, Texas property law and divorce can get tricky.
That is why it’s a good idea to consult with a board-certified family law attorney, like the team at Albin Oldner Law.
At Albin Oldner Law, we have the experience you can count on during a divorce. We are here to guide you through your divorce and any inheritance and community property issues that come up.
Call us today at 214-423-5100 or contact us online to schedule an appointment. We will review your situation and determine what action to take.