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Is Separate Property Acquired Out-of-State Count as Community Property in Texas?

Classifying assets as either community property or separate property significantly impacts division in Texas probate. Property acquired during marriage is generally community property subject to equal split. However, separate property brought into the marriage or acquired by gift or inheritance remains distinct. When spouses move from non-community property states, confusion arises over asset classification. In these cases, is separate property acquired out-of-state count as community property in Texas? The Estate of Hanau v. Hanau, 730 S.W.2d 663 (Tex. 1987) case helps to answer this question.

Facts & Procedural History of Estate of Hanau

The decedent and his wife married in Illinois in 1974 and later moved to Texas in 1979. While living in Illinois, the decedent acquired various stocks using his separate property funds.

After moving to Texas, the decedent created and executed a will stating that all of his separate property would be given to his children, while his wife would receive the community property. He died in Texas in 1982 and his wife was appointed executor of his estate.

The wife claimed the stocks the decedent acquired in Illinois were community property under the ruling from Cameron v. Cameron (1982). That case held separate property acquired during marriage in a common law state should be treated as community property for divorce purposes. The children argued the stocks were the decedent’s separate property.

Community Property

Texas and a handful of other states implement community property.

In Texas, community property is defined as any property that was acquired during the marriage. All income, assets, and debt accrued during marriage falls under this joint ownership scheme. Any property that was acquired before the marriage is considered to be separate property and is not subject to division in a divorce.

Separate Property

Separate property refers to any property that is not jointly owned by a married couple. Typically, separate property is owned by one spouse prior to marriage and/or acquired after the couple has separated.

Certain assets acquired during marriage retain individual separate property status. These include:

  • Property owned before marriage by one spouse.
  • Gifts or inheritances received by only one spouse.
  • Assets purchased with separate property funds.
  • Property specifically agreed to be separate property in writing.

If a couple agrees in writing that certain assets or debts will be considered separate property, an exemption from community property is created. This is often done in cases where one spouse owns a business or has significant debt prior to the marriage.

When Separate Property Becomes Community Property

When spouses relocate to Texas, property classified as separate in their prior state generally retains that status. However, separate property can morph into community property through:

  • Co-mingling separate and community assets.
  • Jointly titling previously individually owned assets.
  • Utilizing community funds to improve or maintain separate property.
  • Treating separate property as marital property after relocation.

Absent commingling or joint titling, mere relocation does not alter asset classification.

In this case, since the split in property was occurring under probate proceedings and not divorce proceedings, the contested out-of-state stocks were considered as separate property. The Texas Supreme Court affirmed this ruling, as the Cameron ruling applied only to divorce proceedings, which requires equitable division, but probate follows statutory formulas or the will.

The Takeaway

Separate property does not automatically transform into community property by moving to Texas. But active commingling or joint ownership can cause a shift. Prudent asset management preserves intended classification.

Texas probate requires proper categorization of community and separate property. For out-of-state transplants, retaining discrete asset classes prevents unintended co-mingling. Careful legal planning and advice provides certainty when probating estates with mixed marital assets.

Our Dallas Probate Attorneys provide a full range of probate services to our clients, including helping with estate planning. Probate is what we do. Affordable rates, fixed fees, and payment plans are available. We provide step-by-step instructions, guidance, checklists, and more for completing the probate process.We have years of combined experience we can use to support and guide you with probate and estate matters. Call us today for a FREE attorney consultation.

Disclaimer: The content of this website is for informational purposes only and should not be construed as legal advice. The information presented may not apply to your situation and should not be acted upon without consulting a qualified probate attorney. We encourage you to seek the advice of a competent attorney with any legal questions you may have.

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