Texas divides property into two types: community property and separate property. In order to own community property, there must be a valid marital relationship. In Texas, any property that a person acquires prior to marriage is separate property. Any property acquired by a spouse during marriage by gift or inheritance is separate property. Any property acquired by a spouse during marriage from the proceeds of separate property is separate property. Any property that is acquired by a spouse after marriage is presumed to be community property, but this presumption may be overcome by “clear and convincing” evidence.
Community property is owned equally by both spouses. So, if there is equal ownership, who manages the property? The answer lies in whether the community property falls into one of two categories.
Texas recognizes two categories of community property: general and special. Special community property is that “property which the spouse would have owned, if single, including personal earnings, revenue from separate property, recoveries from personal injuries, and the increase and mutations of, and the revenue from, all property subject to the spouse’s sole management, control and disposition.”
General community property is marital property that does not fall within the definition provided above. The reader may want to study that definition because there is an important reason for distinguishing between general community property and special community property. The reason has to do with “control.” Which spouse has the right to manage community property that is owned one-half by each spouse?
General community property is subject to the joint management, control and disposition of both spouses unless both spouses execute a written agreement to the contrary. Special community property is subject to the sole management, control and disposition of the spouse who is deemed an owner of the special community property. If a spouse is the owner of special community property and that spouse allows that special community property to be mixed or co-mingled with the special community property of the other spouse, then the special community property becomes “mixed or combined” thereby causing the special community property to become general community property and thereby subject to the joint management, control and disposition of both spouses.
For example, if a spouse, while married, earns wages from a job, the wages from that job are special community property, and subject to the sole management, control and disposition of the wage earning spouse. However, if that spouse mixes or combines those wages with the special community of the other spouse, the property is no longer special community property and is thereby subject to the joint, management control, and disposition of both spouses.
Banker Phares is a practicing attorney and founding member of the Estate Planning and Probate Law certification by the Texas Board of Legal Specialization. He is the John and Karen Mast Professor at SFA and teaches in the Department of Economics and Finance.