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Protecting separate property in divorce

| Aug 21, 2014 | Divorce |

Texas is a community property state, which means that during a divorce, marital assets are be split evenly between the spouses. However, gifts and inheritances are exceptions to the marital assets rules. These assets are usually considered separate property and do not have to be divided when a divorce occurs. However, there are things spouses may do that will invalidate this protection and make gifts and inheritance subject to an equal division.

Generally, gifts made to one spouse by a third party belong solely to that person unless commingled with marital assets. If an inheritance or gift is not kept separate it might lose its protection and be considered a marital asset. For example, depositing a check that was meant to be a gift to one person into a couple’s joint checking account is considered commingling. Because of this, any money must be kept in bank accounts held in one person’s name if they want to keep it protected. In addition, the money cannot be spent on joint purchases, such as buying a house put into both spouses’ names.

A common point of contention is whether money received by a spouse was a gift or actually a loan. Monies received as a loan might be seen differently by a judge than funds intended to be a gift. To protect oneself from future disagreements, it is useful to keep a written agreement that helps to categorize the transaction. For example, if the funds are a loan, a promissory note and written terms for repayment might help provide clarity.

Determining how assets are divided and which assets are protected are only two of the points of contention a person might face when approaching a divorce. The process is complicated, but an attorney could provide a person with help throughout the proceedings. That attorney might be able to develop a strategy that fulfills a client’s obligations to a former spouse while it pursues a stable financial starting point for the client’s future after the marriage ends.

Source: Forbes, “Divorcing Women: Here’s How to Protect Your Inheritances And Gifts“, Jeff Landers, August 19, 2014

Source: Forbes, “Divorcing Women: Here’s How to Protect Your Inheritances And Gifts“, Jeff Landers, August 19, 2014