Texas Divorce Law...

Texas Law - How Do We Divide Part-Marital / Part-Separate Property?

Separate property is allowed to be traced through joint accounts.

Example: Don has a separate brokerage account with a lot of money in it. He and Marla want to buy a co-op apartment. For the $100,000 down payment, Don withdraws $100,000 from his brokerage account and deposits it into the couple's joint checking account. The next day, he writes a $100,000 check for the down payment.

If they take joint title, the court will presume that Don was making a gift to the community.

But if Don makes clear that his interest is separate from Marla's, then the $100,000 of equity is Don's separate property, even though the cash passed through a joint checking account.

If that $100,000 is 10% of the cost of the property, then Don's separate property interest will remain 10% of the property. If the property's equity (value less mortgage) at the time of the divorce is $2 million, Don's separate interest would be $200,000 and the rest would be community property.

The decision to award reimbursement and the amount awarded, though, are in the judge's discretion.

Cases:

In re Levi Bankruptcy, N.D. Tex 1995, 183 BR 468 (all increases to IRA during marriage were community property, whether from income or during-marriage contributions).

Thurmond (1994) 888 SW2d 269 (the down payment on the parties' $200,000 home came directly from a trust created by husband's father; thus, the portion of the 27% purchase price represented by the down payment was the husband's separate property; this is so even though the title to the home and the mortgage were both in joint names; thus 27% of the home, now worth over $400,000, was husband's separate property. Husband had also made mortgage payments from the trust; court implies that husband would be entitled to reimbursement, but husband did not raise that issue).

Walton V. Johnson (1994) 879 SW2d 942 (separate mineral property was traceable to properties inherited by wife from her father, and thus were held to be separate property).

Harris v Holland (1993) 867 SW 2d 86 (Court reimbursed husband for separate property he had contributed to community ranch, but did not reimburse community for money the community had spent to pay down some of husband's separate property debt. This decision was in the discretion of the court.)

Graham (1992) 836 SW2d 308 (the husband had owned a house from a prior divorce; he sold that house and applied the proceeds toward paying off the mortgage on a new house with the second wife; court found that even though the proceeds from the first house were received in the second wife's name, they were nonetheless the separate property of the husband; the community was required to reimburse husband for the amount of that investment in the new home; the remaining equity was community property subject to division; the court also found that had the proceeds been applied to the original purchase of the new home (rather than the retirement of the existing, 1-month-old mortgage, that the result might have been different).

Cook (1985) 693 SW2d 785 (community funds were used to construct a home on husband's separate property land, and to improve a piece of rental property which also was husband's separate property. The court held that the reimbursement due to the community from the property was the increase in value due to the investments. This is the "enhancement" principle. It is up to the court to figure this amount, based on the values before and after the investment).

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