Divorce and Property Improvements by One Spouse

Property division in a Texas divorce is often one of the most difficult terms to resolve. Whether an asset is marital property or a separate property plays a primary role, but when separate assets are used to improve a marital property—or marital assets are used to improve a separate property—the matter becomes that much more complex.

If you have questions or concerns about the division of marital property, an experienced Round Rock divorce attorney can help.

Defining Marital and Separate Property

Anything that you, your spouse, or you and your spouse together purchase or acquire while you’re married is considered marital property. It doesn’t matter whose name is or isn’t on the title, and it doesn’t matter who made the purchase – if you came to own it while you were married, it’s marital property.

There are very few exceptions to this sweeping categorization, and they include:

Any gifts given to either spouse alone
Any inheritances received by either spouse alone
The pain and suffering component of either spouse’s personal injury settlement or court award

The State of Texas begins with the presumption that everything a couple owns at the time of divorce is marital property. As such, the burden of proving an asset’s separate nature falls to the spouse who is making the claim, and convincing evidence is required.

Separate assets refer to assets that either spouse owned prior to the marriage, brought into the marriage with them, and kept separate throughout the marriage. Upon divorce, separate assets remain the property of the original owner.

Is It Marital or Is It Separate?

The matter of whether an asset is separate or marital can become very complicated very quickly. For example, gifts given by one spouse to the other – even those purchased with marital funds – are generally the recipient's separate property.

However, if a spouse gifts you a vehicle for a special anniversary, but both of your names are on the title and it was purchased with marital assets, it’s likely to be considered marital property.

Adding your spouse’s name to the title of a separate asset alters its separate nature to community property. However, this kind of shift doesn’t have to be so straightforward.

Even the way a property is treated can determine whether it is marital or separate. Consistently treating a separate asset like marital property can erode its separate nature.

Ultimately, the title to the property in question – if there is one – does not determine ownership in the State of Texas, which can be a challenging concept for divorcing couples. The matter of when the asset was acquired plays a far more important role.

Improvements to Marital Property

When marital funds are used to maintain, to cover expenses for, or to improve a separate property in the State of Texas, it doesn’t make the asset marital property, but it does entitle the marital estate to reimbursement.

Further, any increase in the value of the asset over the course of the marriage is likely to be considered marital. As such, an asset can be both marital and separate, which is known as proportional ownership of property by the marital estate.

Claims for Reimbursement

It is not unusual for marital funds to be used to make improvements on one’s spouse’s separate asset. In the event of a divorce, the nonowner can seek reimbursement.

Improvements Made

If your spouse came into your marriage with a vacation home, the home is their separate property. Over the years, however, if marital funds were poured into remodeling the home, you likely have a claim for reimbursement of your share of those marital assets upon divorce – since the property remains the separate asset of your soon-to-be ex.

Paying off the Property

If, on the other hand, your spouse came into your marriage with a vacation home that wasn’t completely paid off and the additional payments were made with marital funds, you’d also be in a good position to make a claim for reimbursement.

Business Ownership

If your spouse came into the marriage with a business in tow, it is their separate asset. If you contributed to the business in the form of time, toil, talent, and effort – without fair payment for your efforts – you can seek reimbursement upon divorce.

Further, if your spouse committed their time and effort to running and growing their business without paying themselves a fair wage, those are funds that were kept from the marital estate. And as a result, it could affect the separate nature of the asset or could be an instance in which you can seek reimbursement.

As noted, any increase in the value of the property or business over the years, which is very common, is a marital asset that must be divided between both spouses equitably in divorce.

However, once a property is determined to be separate, the spouse seeking reimbursement must prove entitlement.

Texas Is a Community Property State, but . . .

Texas is a community property state, meaning that marital property—or community property—is owned equally and concurrently by both spouses. However, this does not necessarily mean that all assets will be divided equally in the event of divorce, although they can be.

Texas, unlike some other community property states, implements a just and right division of property, which means a fair division given the unique circumstances involved, including factors like the following:

The length of the couple’s marriage
The size of the marital estate – as offset by marital debt
The size of each spouse’s separate estate
Each spouse’s earning power and the size of the income disparity between them
The child custody arrangements
Whether fault played a role in the breakdown of the marriage – even in no fault divorces
The tax consequences of the proposed division
Each spouse’s age and mental and physical health
Whether either spouse committed financial fraud on the marital estate in the buildup to the divorce
Any additional factors the court considers relevant to the unique case at hand.

The Commingling of Assets

When it comes to distinguishing martial from separate property, commingling is a primary concern, and property improvements are just one form of commingling. Commingling refers to a combination of separate property with community property.

When marital funds are used to make repairs or improvements on a separate property, they can generally be singled out, meaning there are also identifiable boundaries while there is commingling.

In other situations, however, the marital and separate assets become hopelessly commingled, and at this point, the asset – in its entirety – is generally classified as marital. In other words, commingling affects the separate nature of an asset by degree.

Common examples of commingling that often happen in marriages include all the following:

One spouse depositing separate funds into a joint bank account
One spouse depositing their inheritance into a joint bank account
One spouse contributing separate funds or marital funds to the improvement or maintenance of the other spouse’s separate property
One spouse devoting a significant amount of time to managing their own separate investments during the marriage
Spouses who purchase a property jointly but make the down payment with one spouse’s separate funds

This list could go on, and there is plenty of room within each for multiple challenges to arise.

Keeping Separate Property Separate

If you’ve gotten this far and are wondering if there’s any way to definitively keep separate property separate, you’ll be glad to hear that there is, but it takes a considerable amount of commitment. The following list highlights your best bets in this arena:

Create a legally binding prenuptial or postnuptial agreement that specifically addresses your separate assets
Make sure that all the property you bring into the marriage with you retains your name alone on the title or deed
Avoid moving your personal funds into marital accounts, using them for the maintenance or improvement of community property, or offsetting marital debt with them
Before making a large purchase during your marriage, establish whether it’s a marital or separate asset with your spouse

FAQ

Consider the answers to the following frequently asked questions in relation to your own questions about separate property in a Texas divorce.

Isn’t everything that I owned before we married still mine if we divorce?

No, it isn’t necessarily true that everything you owned prior to marriage will remain a separate asset throughout the marriage. Any commingling of assets, which can begin with something as simple as holding them in the same account, can blur the line between separate and marital property, and the more involved the commingling, the more difficult to separate again.

We used marital assets to remodel my spouse’s separate property. Am I entitled to anything in a divorce?

Yes, you can seek reimbursement for your share of the separate funds that went into improving your spouse’s separate property. Additionally, if your spouse’s separate property increased in value over the course of your marriage, that amount is likely a marital asset that must be distributed between you equitably.

My name was conspicuously left off some of the properties we purchased during our marriage. Am I out of luck?

Anything you and your spouse acquired while you were married is considered marital property – regardless of whose name is attached. If you came to own it during your marriage, it will have to be addressed as marital property upon divorce.

How can I prove that an asset is separate?

It can be very difficult to prove that an asset is separate in a divorce. The fact that you owned something prior to marriage, however, is an important starting point, but any commingling with marital funds can weaken your position.

The most important step you can take in your efforts to establish that something is yours alone is working closely with a dedicated divorce attorney with extensive experience successfully handling cases involving complex property division.

My divorcing spouse and I can’t reach an agreement regarding property division. Will our case end up in court?

There is no denying that property division is one of the most hotly contested divorce terms, and if your case involves high assets or serious complications in relation to deciphering what is separate and what is marital property, it can turn the heat up several notches.

Most divorces, however, are settled out of court, and yours is likely to do the same. When you look to the court to divide your assets, you give up decision-making authority, and most couples are very motivated to avoid doing this.

Ultimately, you and your divorce attorney along with your spouse and theirs, will likely negotiate terms that protect your financial rights and that you’re both willing to sign off on. You can also engage in mediation at which a professional mediator will help you explore your best options in light of the applicable laws.

Finally, it’s important to note that, if your divorcing spouse refuses to engage in reasonable negotiations out of spite or for any other reason, going to court may be the best path forward.

It's Time to Consult with an Experienced Round Rock Divorce Attorney

Brett Pritchard at The Law Office of Brett H. Pritchard is a seasoned Round Rock divorce lawyer who has the experience and keen legal skill to resolve his clients’ complex property division cases favorably, and he is standing by to also help you.

Your case will directly affect your financial future, so please don’t wait to reach out and contact or call us at 254-781-4222 to schedule your free consultation and learn more about what we can do for you today.