Marital Prop 2011

8/3/2019 Marital Prop 2011

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Marital Property OutlineProfessor George

I) TEXAS CONSTITUTIONAL PROVISIONSA) Separate Property Defined

1) Separate Property Property that is owned or claimed before marriage or that isacquired after marriage by gift, devise or descent. The legislature has the powerto more clearly define these rights (IE management and liability).

(a) Note that special community property (community property under separatemanagement) was statutorily created under the separateproperty/management and liability rights of the legislature.

(i) Special community property wont retain its special status if youcant trace it.

2) Personal Injury Personal injury recoveries sustained by a spouse are separateproperty except for recover for lost earning capacity. This represents the ideathat the spouses body is property brought into the marriage.

(a) Note that all recoveries for personal injuries are either special communityor separate and thus, the injured spouse need never add the other spouse asa party to such a suit.

(b) Contributory Negligence to the extent that personal injury recovery isseparate property (not community), the other spouses contributorynegligence should not be considered.

(c) Medical Expenses recompense via suit for medical expenses incurred bythe community is community.

(d) Workers Comp compensates for lost wages and is thus community.(e) Future Lost Earnings if you are divorced and have already collected for

lost personal earning capacity up to the present and in the future, you

should argue for a larger percentage of the recovery under a just and rightdivision (though there appears to be some push to make this a pro ratadivision IE if you are injured and lose 20 years of potential employment,then the community should get the recompense for the years you weremarried only)).

3) Increase of the Land Increase of the value of separate property remainsseparate property, but distinguish this from income derived from and producecreated from or on separate property. Produce from separate property isconclusively presumed to be from the efforts of the community and thuscommunity.

(a) Crops - Note that a crop which takes a long time to create (IE timber) maypotentially be taken as separate property (cases are split).

(b) Rule of Increase the offspring of separate livestock is community.(c) Oil & Gas oil and gas is considered part of the land, and thus when sold

is presumptively separate (subject to the doctrine of onerous title).(d) Mutual Funds retained growth in the value of a mutual fund is

considered to be an increase in the value of the separate estate (not incomefrom separate property).

Schuster Marital Property Outline Fall 2006 Professor George 1


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4) Income from Separate Property Dividends, interest, rents, etc from a spousesseparate property is taken as community property.

B) Partition and Exchange1) Partition and Exchange Defined - Both spouses and future spouses can partition

or exchange in writing their community property held presently or to be gained

in the future into separate property.(a) Partition an agreement to create separate estates within a singlecommunity asset by either dividing the property in 2 distinct portions andgiving one portion to each separate estate or just saying that the asset isheld 50/50 and a joint tenancy.

(b) Exchange both spouses take a piece of community property and hold itas separate (they pretty much both take a piece of community).

(i) Exchanges can be used for future or current property. For futureproperty, you can just exchange your future income for mine.

(c) Agreements - A mere agreement to partition and exchange in the futurewill not pass constitutional scrutiny to transform community to separate

property. Further, a contractual clause stating everything is separate evenif we dont partition/exchange is still insufficient.(d) Inequality OK - Note that property exchange/partitioning need not give

equal property interests to both spouses.(e) Specificity if you dont specifically state property that will be included

in a future partitions/exchanges, then they will not be included.2) Fraud partition and exchange cannot be used to defraud a pre-existing

creditor.(a) Note that old law held that you couldnt use partition/exchange to

prejudice a pre-existing creditor (note that the current bar will let youprejudice a pre-existing creditor, so long as you dont defraud them).

C) Income Producing Separate Property1) Spouses (not future spouses) can agree in writing to partition or exchange

income from separate property (current or future) will be taken as separateproperty.

2) Salaries cannot be taken as separate property under this clause, because salariesdo not arise from separate property (spouse labor is community property).

3) Note that this provision allows current spouses to take income from separateproperty as separate property, but any legislative attempt to make all incomefrom separate estates into separate property would be unconstitutional.

4) Un-married people cannot agree that income from their separate property willbe taken as separate property this is exclusive to married people

5) Specificity if you dont specifically state income from separate assets that willbe characterized as separate, then that will not be included in the agreement.

D) Income Follows a Gift Between Spouses (the Wyly Amendment)1) Gifts between current spouses are presumed to include any income which is

produced from that gift.(a) This is limited to current spouses because only current spouses can agree

to take income from separate property as separate property.E) Right of Survivorship in Community Property



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1) Spouses can agree in writing that property held as community property or as a joint tenancy will be held with a right of survivorship. Absent an explicitwritten statement, a right of survivorship is never presumed.

F) Converting Separate Property to Community1) Spouses can agree in writing to make all or part of their separate property into

community property.2) Such agreements must be in writing, set forth the nature of the re-characterization, and clearly describe the property involved.

(a) Merely adding the other spouses name to title will not make communityproperty it will just trigger presumptions of a gift.

3) A separate to community agreement is only valid if (conjunctive):(a) Voluntary transfer of property, and(b) The party received a fair and reasonable disclosure of the effect of such a

transfer.(c) Note: there is a statutory statement that if included in such a written

agreement creates a rebuttable presumption of necessary disclosure (it

describes ownership, creditor exposure, management rights, etc).G) Constitutional Minutia1) Doctrine of Implied Exclusion if a constitutional right is given under a set

group of standards, there is an implied exclusion of any right that the legislaturemight have to make rules expanding or restricting these standards.

(a) Application: the constitution states exactly what separate property is nolaw can amend or abridge such a definition. Therefore, any property thatdoesnt fall exactly into the definition of separate property is community.

2) Probate Homestead a surviving spouse has a constitutional right to life in thecommunity home until her death or until she moves out. This provision can bewaived by consenting adults.

(a) Note that if spouses agree to a prenuptial agreement which states that bothparties would give up all property rights that arise from the marriage, thena wife may have given up her right to a probate homestead.

3) Gifts to the community It is impossible to make a gift to a community estate.Gifts are either to a single spouse or both spouses are tenants in common.

(a) Note that gifts to the marriage will yield separate property, but the incomefrom such gifts is community (absent a spouse to spouse gift).

4) Pre/Post-Marital Agreements (a) Any marital property agreement (other than a separate to community

agreement) can be set aside if you can show:(i) The agreement was not voluntarily entered into, or

Note that you cannot argue involuntariness if the other partythreatened to do or did something that he had a legal right to do.

Common Law Defenses you dont have to prove a commonlaw defense to formation to show involuntariness, but such ashowing cant hurt.

Just because you didnt expect someone to leave you after yousigned a postnuptial agreement isnt grounds for a finding ofinvoluntariness.



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(ii) The agreement was unconscionable at signing because

One party wasnt given a reasonable disclosure of the otherpartys property/financial obligations

That party didnt waive in writing such a disclosure, and

That party didnt have our couldnt have such a disclosure

already. Intentionally not knowing will not be grounds for a finding of

unconscionability.(b) Note that this is the exclusive manner to set aside marital property

agreements, however, you may be able to argue common law issues suchas duress, fraud, etc when you argue that the agreement was voluntarilyentered into.

(c) Marital property agreements must be signed and in writing(d) A marital property agreement can apply to about anything, but it cant

affect child support.5) Separation Agreements TX doesnt recognize legal separation, but upon filing

for divorce, a court may issue orders controlling all aspects of the separationuntil divorce.

6) Income from Corporations Any income paid from a separate entity (IEsalaries, pensions, dividends, etc) will be taken as community property.

7) Implied Validation Doctrine under this doctrine, an unconstitutional lawwhich will become constitutional under a new constitutional amendment will beheld valid as of the statutes original date of inception (not just from the date ofthe new constitutional amendment).

II) CHARACTERIZATIONOFMARITAL PROPERTYA) The Community Property Presumption and Its Rebuttal (103)

1) Community Property Presumption Property possessed by either spouse during

or on dissolution of marriage is presumed to be community property.(a) This presumption applies to all property possessed, not just property

acquired after marriage.(b) Payments if one estate paid entirely for X, then X belongs to that estate.

However, merely making payments on X just entitles that estate toreimbursement for those payments (but not characterization).

(c) Reacquisition if you sell separate property and then reacquire it duringmarriage using community assets, it is community property

(d) Mutations so long as separate property can be properly be traced throughits various forms, mere changes in form do not destroy its separate nature(IE purchases with separate funds, stock transactions, etc).

2) Rebuttal of the Community Property Presumption The community propertypresumption can only be rebutted by clear and convincingevidence.

(a) Parole Evidence parole evidence can be used to rebut the communityproperty presumption.

(b) Separate Purchase if a party purchases property using solely separateproperty during marriage, the property is separate.



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(i) Note that, if during marriage, property is acquired using separate andcommunity property, then the separate and community estates takeas tenants in common.

(c) The Evidentiary Standard(i) Corroboration Most courts will hold that mere testimony is usually

insufficient to rebut the community property presumption. Further,you always need evidentiary corroboration of an interested witnessstestimony to reach the clear and convincing standard.

(ii) Uncontroverted Evidence where evidence is uncontroverted, thepresumption is usually rebutted.

(iii) Tracing Funds when tracing separate property, it is insufficient toshow that separate funds could have been the source of the fundsasserted to be separate.

(iv)Impossibility if funds have become so incredibly commingled thattracing is impossible, no court will find the community propertypresumption rebutted.

3) Theories on Community Property(a) Doctrine of Onerous Title whatever property is acquired by the jointefforts of the husband and wife is community property

(b) Implied Exclusion anything that the constitution didnt say wasspecifically separate property is community property.

B) The Doctrine of Inception of Title (112)1) Inception of Title If a party can show that property was owned or claimed

prior to marriage, then title incepted prior to marriage and the property isseparate.

2) Timing characterization occurs under the doctrine of inception of title at thepoint in which, if you fulfill your contract obligations, no other person on earthhas the potential to take title to this property.

(a) IE if you put earnest money down on a house, get married, and then closeon the house the house is separate because after you put earnest moneydown, no one else on Earth had a legitimate claim to that house if youfulfilled your duties.

(b) Checks if you write a check to purchase property, the date of theclearing of the check (not date on the check) is the date that the transactionoccurred.

(c) Hypo: If during marriage, the community buys land with a 5% downpayment from the community and a 5% down payment from husbandsseparate, we see a TIC is formed. The point of inception sees 5% paidfrom husbands separate, and thus he will take a 5% interest in the land.Wife will argue that he meant to gift half of that 5% to her separate and hewill introduce parole evidence to rebut. Note that if title incepted, andthen later, the husband paid 5%, then he would just get economiccontribution (because characterization has already occurred).

3) Adverse Possession title by adverse possession incepts at the running of theSOL for a naked claimant with no legitimate claim, but if you are on the



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property under a valid title (that may need reforming) then your title incepts atpurchase, though you may later take title via adverse possession.

4) Life Insurance Inception of title applies to life insurance. Proceeds from lifeinsurance policies where title incepted prior to marriage are separate funds,though the community may be owed reimbursement for payments made after

marriage.(a) Community policies can become separate if one party makes anaffirmative act (beyond merely putting someones name on the policy)clearly showing his intent to divest himself of his community interest inthe policy. IE making an absolute assignment of benefits.

C) Tracing (139) to rebut the community property presumption by clear andconvincing evidence, you may trace the origins of money used to purchase propertyback to separate origins. There are 4 main tracing aids (not rules):1) Dollar for Dollar Here you must show that the specific dollars spent (think

serial numbers) were either separate or community. You either need distinctcommunity and separate accounts, or you need to keep serial numbers.

2) One Dollar has the Same Value as Another Dollar 3) Community Depletion Community funds in a joint/community account areassumed to be spent first. Recall separate funds sink to the bottom.

(a) IE if you have a separate bank account that the community starts to use,then the amount of funds available at the lowest level the account everreached during community use is guaranteed to be separate.

(b) Community Depletion of Possible Community Funds If you show thatcommunity expenses from an account exceed all community deposits, thenby definition, all monies left must be separate. SHOULD THIS BE HEREOR UNDER THE CLEARING-HOUSE METHOD?

4) Intent/Clearing-House Method We look to the intent (characterization) of eachindividual debit or credit and add/subtract that much from the separate orcommunity portion of an account.

(a) Forensic CPAs are used to make these terribly complicated accountings.D) Presumptions Arising from Conveyance Through Which Title is Acquired (163)

1) Resulting Trusts (a) Rule when a conveyance is made to X, with distinct party Y paying for

it, X presumptively holds the property in trust for Y. X is the legal titleholder and Y is the beneficial owner.

(i) IE if Community pays for Blackacre and title is put in Spouse 1sname, then spouse 1 presumptively takes legal title with Communitybeing the beneficial owner.

(b) Exception If the party taking legal title to the property is a natural objectof the payors bounty, then the property is presumed to be a gift with noresulting trust being created. (IE if wife spent separate fund to buyBlackacre during marriage and put both spouses names on the deed, thereis a presumption of a 50% gift to husbands separate estate)

(c) Rebuttal presentation of clear and convincing evidence can rebut thepresumptions of gift or trust.



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(i) A statement of intent to create or not to create such a trust issufficient to overcome this presumption.

(d) Timing if a resulting trust is to be created, it mustbe created at purchase.(i) IE if X buys land by putting 50% down and then Y takes pays off the

other 50%, no resulting trust is created in Y because Y had nothing

to do with the property at the time of purchase.(e) Transfers During Marriage if a spouse owns property during marriageand then deeds it to the other spouse, then there is a conclusivepresumption of a gift. Parole evidence wont be admitted.

(i) This presumption is present because there was absolutely no need tomake such a transfer absent intent to gift.

(f) Example: Husband and wife intend to buy Blackacre for 10K. Husbandpays 9K out of his separate account and wife pays 1K out of her separateaccount. Title is placed in Husbands name. There is a presumption thatwife gifted her 1K to husbands separate estate and he took Blackacre asseparate property.

(i) Note: In this hypo, note that no party could ever argue this to becommunity property because it was paid for exclusively out ofseparate accounts.

Separate property can only become community through anexpress writing.

(ii) Parole Evidence parole evidence could be proffered to rebut thepresumption that wife intended the 1K as a gift.

(iii) Significant Recital if the title to Blackacre stated that this washusbands separate property, then there is a conclusive presumptionthat this is husbands separate property (no parole evidence).

(iv)Note: if it had been Fred (Husbands Boss) who paid the 1K, then a

10% beneficial ownership of Blackacre would be found for Fred.2) Gifts A conveyance between spouses is presumed to be a gift.(a) Parole evidence - This presumption can usually be rebutted by parole

evidence.3) Significant Recitals A significant recital is a statement in a deed that property

is taken as community or separate property or that community or separate fundswere used to pay for the property. If both parties were privy to the contract,then a significant recital is conclusive absent fraud.

(a) Parole evidence in the presence of a significant recital, absent fraud ormistake, parole evidence will not be used to rebut the presumption of agift.

(b) Privity if a non-grantee spouse isnt privy to a contract including asignificant recital, then he can proffer parole evidence.E) Credit Transactions (193)

1) Separate Credit if a bank unequivocally agrees only to look to separatecredit/assets as security for a loan, then the loaned funds taken are separate, andanything purchased with such funds is separate.

(a) Merely stating that you intend to pay a loan back with separate property isinsufficient.



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(b) The bank needs to explicitly state, I will only look to your separateproperty for recompense.

2) Ray Debt A debt in which the bank agrees solely to look to separate assets assecurity, and thus, the loaned funds are taken as separate property.

F) Personal Injury Recoveries which Presumption or Rule Controls (209)

1) Community vs. Separate In a person injury case, recompense for lost wages,reimbursement for community funds expended on medical costs, etc. arecommunity, while recompense for personal injuries, loss of consortium, etc. aretaken as separate. However, it is common for personal injury recoveries not to be delineated between separate and community this leads to 2 potentialpresumptions of what the characterization of the property is:

(a) Community Property Presumption property acquired during marriage ispresumed community and thus, what % of the recovery is separate must beproven.

(i) Pro-Community Argument - you could argue that in the recovery,you agreed that this was released you from all claims of personal

injury, lost wages, etc. and thus the recovery was commingledcommunity/separate.(ii) Pro-Separate Argument you could argue that $X is the most I

could have possibly made in the future, and $Y is how much moneythe community paid for medical bills from community funds therefore, anything in excess of $X + $Y must be separate.

(b) Statutory Presumption Statute states that recovery for personal injury(less recompense for lost wages) is separate, and thus, we should presumerecovery for personal injury to be separate.

(c) Solution Get a valid allotment of the recovery to each potential groundof recovery (dont try and have .01% allocated to lost wages) and thatwould settle it.

(i) Pro-Separate Argument If you lose on the characterization, thenargue just and right division (you were the one hurt).

2) Inception of Title The characterization of personal injury recovery depends onwhen the injury occurred. If it occurred during marriage, then it will becommunity (to the extent possible), but if it occurred outside marriage, then itwill be separate.

G) Separate v Community Property Minutia1) Oil and Gas Sales - Oil and gas reserves on separate land are part of the land

and thus, are separate property.(a) Reasonable Time - The owner of the property is only allowed to invest

reasonable efforts (of community time and toil) to preserve the separateestate and put it to productive use.

(i) Efforts beyond this reasonable level may lead to eventual toilreimbursement.

(b) Corporations/Partnerships Note that if you are selling your oil/gasthrough a 3rd party corporation, then any payouts from the corporation istaken as community property (as it is essentially a salary or income fromseparate property).



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(i) Entity Theory under the entity theory of partnerships (as opposedto the aggregate theory), a partnership has its own distinct propertyfrom the personal assets of the spouses.

(c) Delay Rentals If a party pays you notto drill on separate property for atime, this is treated as rental income and thus will be community.

III)CLAIMSFORECONOMIC CONTRIBUTIONAND REIMBURSEMENT

A) Reimbursement & Economic Contribution1) Reimbursement an equitable remedy which arises when the assets of one

estate are used to benefit another estate without itself receiving some benefit.(a) Reimbursement to a community estate is improper for:

(i) Child support, alimony, or spousal maintenance(ii) Living expenses of a spouse or child of a spouse,(iii) Contributions of property of nominal value,(iv)The payment of a nominal liability, or(v) Student Loans owed by the spouse

(b) Reimbursement may specifically include:

(i) Payment of an unsecuredliability of another, or(ii) Inadequate remuneration to the community for community time, toiland effort expended to benefit a separate estate, or

(iii) Use of funds (not secured debts) to increase the value or upkeepseparate property, or

(iv)Other equitable instances where one marital estate uses its assets tobenefit another estate.

IE 50% of excessive and capricious gifts given to 3 rd parties tothe marriage.

(c) Use and Enjoyment A claim for reimbursement may be offset by thevalue of use and enjoyment taken by the community estate.

(i) Such use and enjoyment may include living in a house, use of a car,(potentially, though unlikely) tax benefits claimed by the communityarising from separate property, etc.

(d) Valuation reimbursement claims should be valued by the increase invalue to the receiving estate, not the cost to the donating estate.

(e) Reimbursement will be reflected in the just and right division ofcommunity property at dissolution of marriage.

2) Economic Contribution a martial estate that makes an economic contributionto property owned or debt owed by another marital property estate has a claimfor economic contribution from the benefited estate.

(a) Ownership Interest? A claim for economic contribution doesnt create an

ownership interest in the property of another estate; it merely creates aclaim against the other estates property that matures upon dissolution ofthe marriage.

(b) Economic contribution is appropriate for (TX Fam. Code 3.402):(i) Reduction of principle on loans secured by separate property,

(including pre-martial, gifted, and Ray debt separate property),(ii) Refinancing of abovementioned debts to the extent that the

refinancing reduced the principle on the above loans,



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(iii) Reduction of principle on secured debts incurred for theimprovement of property, or

(iv)Capital improvements on property.(c) Economic contribution is not appropriate for:

(i) Expenses on ordinary upkeep, taxes, insurance or interest

(ii) Time, toil, talent or effort expended by a spouse(d) Timing Economic contribution is only appropriate after the purchase ofproperty (always on the reduction of the principle of secured debts).

(i) Thus, if a wife contributed separate property to the communitysdown payment on a house, economic contribution would not beapplicable, though reimbursement might be. Further, the wife couldhave just rebutted the presumption of gift to the husband and argueda resulting trust.

(e) Mandatory economic contribution seems to be a mandatory rule thatcourts must consider and allocate (as opposed to reimbursement, which isequitable relief to be given in the courts discretion).

(f) Use and Enjoyment A claim for economic contribution may not be offsetby the value of use and enjoyment taken by the community estate.(i) Hypo: if you move into a house gifted to you as separate property

and the community pays the mortgage, then the community will bedue economic contribution and you cant get use and enjoymentoffsets.

(g) Title note that one estate must have title and another estate put moneyinto it for statutory economic contribution to be proper.

(h) Economic Contribution = Equity @ Divorce x Money put in by separate /(Community Equity @ 1st Contribution + Further CommunityContribution)

3) Reimbursement & Economic Contribution(a) Conflicts if there is a potential claim for economic contribution and

reimbursement, then the proper claim is for economic contribution.(b) Burdens the party asserting reimbursement or economic contribution has

the burden of pleading and the burden of proof.(i) If a separate estate is asserting a claim of economic contribution or

reimbursement against the community he must prove by clear andconvincing evidence, but the community can get such recompensevia a preponderance of the evidence.

(c) Imposition of a Lien In order to effect the payment of a claim foreconomic contribution or equitable reimbursement from a non-liquidmarital estate, the court needs to go through 2 steps: (1) impose a lien,and (2) foreclose on that property.

(i) Why is this necessary? A court cannot, upon dissolution of amarriage, divest a party of their separate property. As such, a partyis owed a foreclosure hearing prior to divestiture (due process).

B) Reimbursement for Time, Toil, Talent and Effort (226)1) Reimbursement for time, toil, talent, and effort expended by the community

estate to benefit a separate estate may be proper to the extent that the



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community expended efforts in excess of the labor necessary to upkeep andpreserve the separate estate.

2) Reimbursement = Value of effort expended Value of reasonable efforts Value of remuneration received

(a) Remuneration should include every benefit that arose due to the expended

efforts of the community in excess of reasonable upkeep. IE lifeinsurance, death benefits, etc.(i) Remuneration shouldnt include income that could have been had

outside of the use of community efforts (IE rental income).(b) Value of effort expended is evaluated by an expert.

3) Stock Value Increases of separate stock value (in a closely held corporation)due to community efforts is still separate property.

(a) Enhancement A threshold issue to get toil reimbursement. There needsto be enhancement to the separate estate (usually in stock value increase)in order for there to be anything worth attempting to get in reimbursement.

(i) There is still a question of law regarding if toil reimbursement

should be limited to enhancement.(ii) Argue that a portion of the enhancement was due to the reasonableupkeep of the separate estate (and thus not reimbursable).

4) Pleading Make sure that you plead toil reimbursement, because courts havepoured people out on toil reimbursement for only pleading reimbursement forfunds spent by the separate.

C) Beginning Balance Reimbursement (251)1) Beginning Balance Reimbursement where a spouses separate funds are used

as a basis to create community wealth and all separate/community funds havebecome incredibly commingled, then a separate estate may be reimbursed forthose separate funds used as the foundation of the community wealth.

2) Business Stock if a business is owned pre-marriage, tracing of the stock at thetime of marriage is probably impossibly difficult, but you may be able to claimreimbursement for the value of that stock.

D) Reimbursement for Retained Earnings, Reimbursement for Use of CommunityCredit (266)1) Retained Earnings if spouse owns a separate Subchapter S corporation which

the community pays income tax on all corporate income both retained anddistributed, the community has no claim of right to the retained income (calledpreviously taxed income).

(a) Note that reimbursement may be proper for the taxes owed by thecorporation on the retained earning that the community paid.

(b) This goes along with the entity theory of corporations anything held by acorporation is not community or separate it is corporate property.

2) Community Credit it is possible that use of community credit for the benefitof the separate estate may lead to reimbursement liability to the communityestate.

IV)MANAGEMENTAND LIABILITYOF PROPERTYDURINGTHEMARRIAGEA) Management (308)

1) Sole Management



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(a) Separate Property - Each spouse has the sole management, control anddisposition of their separate property.

(b) Special Community Property Each spouse has sole management, controland disposition of special community property (exclusively including personnel earnings, revenue from separate property, personal injury

recoveries and increase/mutations of special community property).(i) Note that spouses can agree (orally or written) to make communityproperty special community.

(ii) Thus, under the doctrine of implied exclusion, dont try to argue thatother stuff is special separate property.

(iii) The management right of special property includes the exclusiveright to contract for resolution of personal injury claims.

(c) Presumption property is presumed to be under the sole management of aspouse if title is in his name or if he is in possession of it.

2) Joint Management Regular community property or joint tenancies of specialcommunity property are subject to community control.

3) Protection of 3

rd

Parties A 3

rd

party dealing with a spouse is a BFP if thespouse he is dealing with is presumed to have management over the property inquestion and the 3rd party isnt involved in defrauding the other spouse anddoesnt have actual or constructive notice of this spouses lack of authority.

4) Property converted from separate to community (a) Title if the propertys title is held by one spouse, then he is the manager

and if it is held by both spouses, then the property is joint-management.(b) No-Title if the property isnt subject to title, the property is subject to

management by the donating spouse or subject to joint-management ifboth spouses previously owned a share of the property.

B) Liability (297)1) Separate Property a spouses separate property isnt liable to debts of the other

spouse, unless both spouses are jointly liable.(a) In a Ray-debt situation, only your separate property is liable.

2) Special Community Property Special community property isnt liable fordebts incurred by the other spouse (1) prior to marriage, or (2) by any non-tortious means during marriage.

(a) Your special community property is subject to all of your personal debts.3) Tortious Liabilities allcommunity property is subject to tortious liabilities of

either spouse.4) Pre-Marital Debts a spouses pre-marriage creditors can access that spouses

special community and separate property, as well as the joint-managementcommunity property.

5) Joint Liabilities all five marital estates are liable (2 x separate, 2 x special, 1 xjoint-management community) for debts incurred by the community.

(a) A spouse can only be personally liable by the actions of his spouse if thedealing spouse was (1) an agent of the other spouse, or (2) incurring a debtfor necessaries.

(i) A spouse is not the other spouses agent simply because of marriage.



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(ii) Only under if a spouse is personally liable can creditors get to hisseparate community assets for non-tortious debts.

(iii) Note that a spouses contract cannot create liability for the otherspouse (outside of the above exceptions agent or necessaries). Onespouses contract only creates liability for her portion of the

community.(b) A joint liability can be created if a spouse ratifies the community debtcreated by the other spouse.

(i) Ratification requires:

Approval by act, word, or conduct;

with full knowledge of the facts of the earlier act; and

with the intention of giving validity to the earlier act.(ii) Ratification can be found by acceptance of the benefits of a debt

after finding out about the debt associated.(iii) Ratification is a largely a question of intent.

C) Fraudulent Conveyances (326) Fraud on the community will be reflected in the

just and right division at dissolution.1) Constructive Fraud

(a) Constructive Fraud - A gift from the community assets may be considereda constructive fraud on the community if the gift is excessive orcapricious upon a consideration of:

(i) Size the size of the gift

If a spouse brought a great deal more separate property into thecommunity than the gift donated, the gift is unlikely fraudulent.

(ii) Relationship the relationship of the donee to the donor(iii) Left Over the amount of money left in the community estate after

the gift.

Q: Is there still sufficient funds to provide for the non-donorspouse?

(b) Rebuttal If a conveyance is found to be constructive fraud, rebuttal is puton the donee. The court may find justifiable instances where a finding ofconstructive fraud can be rebutted (IE leaving life insurance to a businesspartner).

(c) Consent If a community knows of and consents to 3rd party gifts (aconjunctive test), then constructive fraud is inappropriate.

(d) Remedies a defrauded spouse may, at dissolution, receive recompensefor what they have lost (50% of the wrongly given away property).

(i) Punitive damages are not proper in suits between spouses.

(ii) As the remedy should represent what was lost, it shouldnt exceedthe worth of the estate.

2) Actual Fraud defrauding the community estate with the intent to deceive.(a) Note that there is no actual tort of fraud on the community.(b) Note that though punitive damages between spouses are inappropriate,

actual fraud can be considered in making a disproportionate just and rightdivision.



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(c) Note that if a party helps a spouse commit actual fraud, then that partymay be held liable for damages (and punitives if fraud or malice is provenby clear and convincing evidence).

3) Insurance Policies Community owned insurance policy payouts are owned50/50 by the spouses. Thus, if a husband designates 100% of an insurance

policy outside the marriage, then 50% of it will be a gift. Look and seeconstructive fraud or actual fraud is present.D) Liability of Marital Property (356)

1) Federal Income Taxes (a) State law defines that a spouse has a property interest in allcommunity

assets (all 3 estates).(b) Under federal law, if a state gives a person any property interest in

something, then the IRS can attach that property to pay taxes.(c) Thus, a pre-marital debt of one spouse (which would normally only attach

to their separate, special community, and joint-management communityproperty) will also attach to their spouses special community property.

2) Security Interests if a security interest on a loan is separate property, and thesecurity is necessarily sufficient to cover the amount of the loan (IE putting upTreasury Bonds worth more than the loan), then the money taken from the loanis separate property.

3) Life Insurance Proceeds Life insurance proceeds from a spouses policy aretaken as separate property (as it is a bequest see definition of separateproperty). Thus, creditors of the community who cant reach surviving spousesseparate estate are out of luck.

(a) Note that under TX law, you cant make gifts that would put your totalassets below the level of indebtedness you currently are at. Thus, anysuch gift would be set aside. Thus, an assignment of a life insurancepolicy may be voided to cover debts existing at the time of the insuranceassignment (if the reduction of the worth of the assignor by the thencurrent value of the insurance policy would put the worth of the assignorat a level less than his indebtedness.

4) Creditor Interests If a creditor could attach certain properties during marriage,that creditor can attach the same properties no matter how they were distributedin a divorce decree.

(a) Assignment of Liability even if a liability for a community debt to acreditor is assigned to a party on divorce, that creditor can still seeksatisfaction of that debt from either spouse because it was their debtduring marriage and a divorce cant prejudice creditors claims.

(b) IE if a wife ended up with some of the husbands special communityproperty or joint management community property after divorce, then thehusbands creditors during marriage can still sue her and attach thoseproperties.

5) Creditor Claims Against Special Community Property Note that a non-tortiouscommunity debt incurred by a single spouse who the other spouse is not liablefor will not touch the non-debtor spouses special community. Thus, if theparties have orally agreed to control agreed upon portions of the community



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estate (IE at break up, pre-divorce), then the other spouses creditors cant get atyour property.

E) Protection of Third Parties (370)1) Bona Fide Purchasers a land sale will not be set aside if the purchaser gave

valuable consideration to a person holding apparent title, so long as the BFP

doesnt have notice of a superior claim of title.2) Apparent Title a BFP can take a property interest from a spouse who hasapparent title to property, shown through possession or having the title in hisname, so long as the BFP doesnt have notice or knowledge of adverse claims.

3) Secret Title Holders a BFP is protected from a hidden or secret adverse claimof title (to the sellers) if the BFP couldnt know of the adverse claim (IE anunrecorded equitably adopted kids intestate claim).

4) Knowledge vs. Notice Knowledge is actual knowledge of an adverse claim onproperty while notice is knowledge of facts that would put the party on noticethat some further investigation may be appropriate.

5) Joint Title Owners If 2 parties are listed on the deed to property, then

obviously, you need to make sure that they both assent to the sale orencumbrance because their names both being on the deed puts you on noticethat there are multiple claimants.

(a) This puts you on notice. Anyone with any business sense would want tomake sure that they are taking property under a valid title. You want tomake sure that spouse 1 can sell spouse 2s share. His mere assertions thathe can shouldnt be enough.

F) Management and Liability Minutia1) Employer Disclosure a spouses employer has no obligation (outside of

discovery) to disclose employment benefits to anyone but the employee spouse,and thus, spouses had better look into such things when divorcing.

2) Virtual representation an archaic idea that a suit against the husband alone issufficient to find liability against the joint community.

(a) In present law, a wife is an indispensable party to a suit attempting to gainaccess to her portion of community property (specifically her specialcommunity assets); her rights will not be biased by suits against herhusband.

(i) Her interest in the community estate may be subject to communitydebts, but she must still be sued for a party to collect on her specialcommunity portion.

(b) Thus, if a husband files suit and is dismissed, then no res judicata will befound against the wife (as she was not a party to that suit).

3) Suits against a Single Spouse you can sue a single spouse and not the otherspouse if you are only trying to get at their portion of the community estate(joint-management and special community plus separate property).

4) Piercing the Corporate Veil(a) If the corporate veil is pierced, then a corporation is treated as a

partnership (or a sole-proprietorship) and any assets held by the spouse inthe business entity will be treated as community property subject to a justand right division.



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(b) Alter-Ego if a corporation is found to be just another name for anindividual (not a separate entity), then the corporate veil may be pierced.

V) DISSOLUTIONOFTHEMARRIAGEBY DIVORCEA) Just and Right Division (382)

1) Divorce Decrees divorcing couples can present a divorce decree to a court, but

the court must still deem it just and right to be valid.2) Appellate Review a just and right division will not be thrown out on appealabsent a clear abuse of discretion.

3) Separate Property While a court cannot divest a party of his separate propertyat divorce, separate property can be considered in making the division.

4) Phantom Debts if a debt does not truly exist or has not been appropriatelyproven, then you need to argue that it doesnt exist if it is assigned to yourclient, as such an assignment would improperly balance the property division.

5) Considerations a just and right division may consider: (1) adultery, (2)constructive fraud, (3) fault for divorce, (4) disparity of earning capacity, (5)business opportunities, (6) education, (7) relative physical condition/obligations,

(8) relative financial condition, (9) disparity of ages, (10) size of separateestates, (11) nature of the property to be divided, (12) attorneys fees, (13)pension plans, (14) care for children, (15) reimbursement, etc.

6) Improper Gifts If a husband spends an outrageous sum on 3rd party gifts (IE toother girls), then equitable reimbursement (via a just and right division) canmake sure that the wife gets her 50% of the gifts from the community.

(a) If it is admitted that the husband has abused the community funds, then theburden is one him to show an exact sum, or the court will come up withone.

7) Pension Plans in an example of the courts broad discretion, a court (acting asthe finder of fact) could choose to value one spouses pension plan at its currentworth and the other spouses at its future worth after considering the retirementages, current ages, etc.

8) Question of Law - Only the judge can make a just and right division and onlythe finder of fact can value and characterize.

B) Divestiture of Separate Property Not Just and Right (387) a divorce court has noright to divest a party of their separate property.1) Divestiture could be found by placing liens on property and then foreclosing (IE

reimbursement, economic contribution, etc).2) A court can put separate property in trust for the benefit of the kids, so long as

the corpus of the trust is returned to the spouse.3) Appellate Review Divestiture of separate property is the only automatic

grounds for finding an abuse of discretion.(a) Normally an abuse of discretion in dividing property would only be found

if the court could show (1) mischaracterization, and (2) that a differentdistribution would have been made under a proper characterization.

C) Quasi-Community Property and the Just and Right Division (403)1) Quasi-Community Property separate property acquired outside of TX that is

taken in a fashion that it would have been community property had it been



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acquired in TX at the same time will be treated as community property atdivorce (but not at death).

(a) Property acquired for quasi-community property is still quasi-community.(b) Note that property acquired in a common law jurisdiction that was taken in

a way that would produce separate property in TX, is still separate.

2) Common Law courts have held that even prior to codification of quasi-community, this was the common law. This way the court can reach back as faras they want with this law.

D) Valuation for Division (428) A trial court musthave a valuation of marital assetsto make a just and right division.1) As per statute, upon a partys request, the court shall present findings of law and

fact regarding characterization and valuation.(a) Failure to do this is reversible error (abuse of discretion)

2) Finder of Fact Only the finder of fact can value and characterize and only thejudge can make a just and right division.

3) Discovery failure in discovery may necessitate a revaluation.

E) Good Will1) The Good Will Test divisible goodwill must:(a) Exist independent of the husbands skill, and

(i) If this is a corporation, then you probably pass this test.(b) Must have a commercial value.

(i) Value may be determined as defined in allocation of value togoodwill in a partnership agreement. IE If you leave ourpartnership, we will pay you $X for the value of your goodwill.

Note that this manner of valuation (by the partnership agreement)has been found incorrect in some cases.

2) Non-Professional Goodwill goodwill can exist in any profession.

3) Personal Goodwill (IE sole proprietorship) no divisible community assetexists in a sole proprietorship which has no value outside the spouse (allgoodwill is attributable to the spouse).

4) Corporate Goodwill (IE corporations) a divisible community asset exists in acorporation that has value outside the spouse personally (goodwill is notattributable to the spouses good will).

F) Partnership Distributions (448) Any partnership distribution is income and thus isa community asset.1) Origin no matter what the origin of the funds within the business entity (IE if

husband put separate funds into a corporation), any distribution will be taken ascommunity property.

2) Interests Note that a spouse doesnt have any interest in the other spousesseparate corporation until distribution of funds.G) Retirement and Other Employee Benefits (463)

1) Defined Benefit Plans take an average salary for one year and use that todefine a monthly, yearly, or lump sum payment on retirement.

(a) Under Tex. Fam. Code 3.007(a&b), there is a separate property interest inthe portion of a payment that the spouse was entitled to outside of



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marriage, and a community interest in any proportionate share of apayment that accrued during marriage.

(b) Total value at date of divorce - value at date of marriage = communityportion.

(c) Burden of Proof - The spouse with SP interest must prove what the value

was at the date of marriage.2) Defined Contribution Plan take the amount of money that the party and/orcorporation put into a retirement plan and then pay out a dependent sum.

(a) Under Tex. Fam. Code 3.007(c), defined contribution plans will be treatedjust like normal investment property. You will need to trace your separate(pre-marriage) investments to overcome a community propertypresumption.

(i) Apply tracing and characterization principles like you would forother property.

3) Stock Options (a) To define the community vs. separate interests in stock options, apply the

formula:(i) % Separate Interest = 100 x Time spent single between inception andvesting / total time between inception and vesting

H) Alimony or Maintenance (473)1) Temporary (Pre-Divorce) Alimony A separation that represents the donee

spouses portion of community income while the community still exists.2) Agreed Alimony Parties can agree to alimony under contract law, even if

courts cant give out alimony (beyond maintenance).(a) Agreed alimony cant be enforced via contempt of court, but it can be

enforced in contract.3) Post-Divorce Maintenance Post-Divorce Maintenance is appropriate if:

(a) Abuse a spouse is convicted of or receives deferred adjudication forfamily violence during the proceeding the proceeding or within 2 yearsprior to the divorce filing.

(b) 10 Years the marriage lasted >10 years and a spouse lacks separate andcommunity assets to provide for minimum reasonable needs plus:

(i) Incapacitated the spouse cant provide for themselves because theyare incapacitated, or

(ii) Disabled Kid the spouse has a disabled/retarded kid who needs tobe watched over at home, or

(iii) Earning Capacity spouse clearly lacks earning capacity necessaryto meet minimum reasonable needs.

Earning Capacity is presumptively not a valid grounds formaintenance unless the spouse has:

Diligently attempted to find proper employment, or

Attempted to become self-supporting during the separationand proceeding (IE education)

(c) Enforcement courts can enforce maintenance with contempt of court andthey can also enforce agreed alimony under contempt if the agreed



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alimony represents a property agreement that the court could have comeup with under maintenance.

(d) Quantum of Maintenance(i) Duration Maintenance shouldnt extend beyond 3 years and only

for as long as it is reasonable to allow the spouse to fend for herself

(unless she is disabled, is caring for a kid, or has some other goodreason for not getting a good job).

Continuous maintenance may be appropriate if the spouse or akid in her care is disabled (mentally or physically) for theduration of the disability.

(ii) Amount maintenance shouldnt exceed either $2,500/month or20% of the payors income. The amount should only be enough togive the other spouse minimum reasonable needs.

(iii) Considerations - A court should consider financial resources,education, duration of marriage, age, financial resources, etc ingranting the amount and duration of maintenance.

(iv)Termination maintenance ends upon death or remarriage.(v) Review of Maintenance an order for spousal maintenance issimilar to an award of child support and will only be revered upon ashowing of an abuse of discretion.

I) Appellate Review of the Property Division1) Divestiture if an appellate court finds that the trial court divested a separate

estate of property, then this is per se reversible error.2) Abuse of Discretion in any situation other than a divestiture of separate

property, a party asserting an improper characterization and thus improper justand right division must show:

(a) Mischaracterization - either by factual insufficiency (the great weight and

preponderance of the evidence supports her) or legal insufficiency (as amatter of law, the property should have been characterized her way), and(b) Harm Analysis to show that due to the mischaracterization, the overall

division was an abuse of discretion.(i) Standard: If a mischaracterization creates more than a de minimis

effect on a property division, it is reversible error.3) Appellate Role the appellate courts role is to determine if the trial court

abused discretion in making a division. The appellate court cannot make anydivisions of property or change a division itself.

J) Other Post Judgment Actions1) Motions in Aid and Clarification of Judgment

(a) Power - If a judgment is unclear as to certain specifics of the execution ofa divorce decree (IE time, place, manner of property division), then ajudge may fill in the gaps to save the order.

(i) The power to do this comes from a judges inherent power.(b) Limitation this power is only limited to procedural fixes; the court

cannot change substantive provisions of a divorce decree once it has beenhanded down.



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(c) Appeal if a party wants to change substantive provisions of a divorcedecree, they need to file an appeal. If a case is on appeal, the trial courtcant issue motions in aid and clarification of judgment.

2) Omitted Property if property is not split in a divorce decree, then an ex-spousecan later petition for a just and right division of the omitted property.

(a) SOL the statute of limitations for such a division is 2 years after aspouse denies you a right to such property.K) Divorce Minutia

1) Military Retirement Benefits military retirement benefits are to be divided atdivorce as per the laws of that jurisdiction.

2) Lost Property If neither spouse benefited from, or currently holds lostproperty, then it is not a proper object for a just and right division.

3) Remarriage if 2 parties get remarried, then their divorced decree will becomeinvalid.

VI)INTERSPOUSAL TORTSA) Abrogation of the Inter-Spousal Tort Immunity Doctrine In 1987, TX did away

with the last bits of inter-spousal tort immunity. Spouses are currently able to sueeach other for any tort.B) Spouses may join a tort action with a divorce suit and it is discretionary with court

on whether to sever the actions.C) Spouses may bring a claim for intentional infliction of emotional distress between

spouses1) Should be able to join this claim with other claims2) May be res judicata if pursue separately3) There is no cause of action for negligent infliction of emotional distress between

spousesVII) PROPERTYRIGHTSTHAT ARISEWHEN THEREIS NO FORMALMARRIAGE

A) Meretricious Relationship Cohabitation by persons who both know they are notmarried.1) Meretricious relationships dont rise to the level of marriage, but some property

rights can arise. If you can successfully win a meretricious relationships case,then you will get the expectations of the parties.

(a) Note that no property rights will be found if some illegal meretricious stuffwas going on between the parties.

(b) Express Contract Show that the parties expressly stated whatconsideration would be given between the parties.

(c) Implied Contract Show that the parties had a contract implied betweenthemselves.

(d) In absence of express agreement, a court may fashion an equitable remedyto compensate woman

(e) Potential Remedies(i) Constructive Trust(ii) Resulting Trust(iii) Quantum Meruit - reasonable value of household services rendered

reasonable value of support received (must show expectation ofmonetary reward for the household services rendered)



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This is a tough one to claim.2) Texas Law if she can show that money used to buy land was acquired in

whole or in part by her labor in connection with man before when land waspurchased, then she is entitled to portion of land in proportion to her labor(allowed in gay relationships too)

(a) Her right had to have existed in the fund that purchased the land. Nothingthat she does later will make a trust.

(i) If so a trust arises in her favor. However, the trust needs be found atthe time of purchase (so she needs to have contributed then).

(ii) No need to show that she actually brought in actual funds

If can show joint efforts lead to the property, then she willoccupy position man would occupy. Each would own theproperty in proportion to the amount of labor they put intoacquiring the property.

IE if one party is putting up money to buy a house and the otherparty is putting in effort to fix it up and then they sell it the

funds coming in may belong to both of them.(b) Partnerships if 2 parties buy land and then get married, a court may hold

that both take 50% on divorce by stating that upon buying the land, theparties engaged in a partnership.

(i) This may be true even if one party took title in his name.(ii) If parties both put money and work into the property, then it may be

found to be the object of a partnership.B) Putative Spouse a party who in good faith believe that he/she is married, but in

reality cant be married because of the existence of an unknown impediment, suchas an un-dissolved prior marriage.1) Presumption: the most recent marriage is presumed valid unless rebutted

(a) Rebut by showing that you cannot find divorce in the records(i) Dont have to check every jurisdiction, just ones that you would

reasonably think person would file divorce in2) Once putative spouse has actual knowledge of the facts, the putative status goes

away.3) Putative spouses are entitled to the same property rights to property acquired

during marriage as any normal spouse.(a) IE a putative wife will be able to take any property rights (IE life

insurance) that accrued during the putative marriage.C) Common Law Marriage Given the same rights as those married by ceremony.

1) Common Law Marriage can be found via:

(a) Declaration of Informal Marriage - signed (go down & declare) advantage is that can back date this declaration unlike marriage(i) This is beneficial because you can backdate this document IE we

have been married since X date.(b) Informal Marriage - Meet the following requirements:

(i) Man & Woman agreed to be married

This agreement can be inferred if the parties lived together andheld themselves out as married.



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(ii) Lived together in Texas after agreement(iii) They hold themselves out to be married

You cant keep your marriage a secret(iv)Note: If there is no judicial proceeding to prove a common law

marriage under the above section within 2 years of the parties

ceasing to live together, then it is rebuttably presumed that theynever agreed to be married.

2) Common law marriage can be shown by circumstantial evidence.(a) IE signing as husband and wife, celebrating an anniversary, etc.

3) Note that there is no common law divorce in TX.

Marital Prop 2011

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