Community Property:

•    Preliminary question in all community property states before you can identify intestate succession
•    Both spouses own ½ immediately
•    Texas community property rules different from all other community property states
•    Originalist states – LA, TX, NM, CA, NE, ID, WA – based on civil law
•    In 1980’s WI added through “Uniform Marital Property Act”
•    In 1990’s AK added – citizens can opt into a community property arrangement
•    Separate Property includes (FAM §3.001):
-    Premarital property
-    Gift, devise (testate), descent (intestate)
-    Recovery for personal injury, except recovery for loss of earning capacity (which is substitute for wages which are community property) – up til end of marriage
•    FAM §3.002 – Community Property
•    “Inception of Title” rule underlies all this
-    What it starts out as it continues as
-    Appreciation and proceeds from separate property are also separate property
-    Dividends/income from separate property is community property (only in TX, LA, ID)
-    Texas Trust Code regulates this income/gain divide
•    Exceptions in Texas:
-    Agreement income from separate property is separate property (§16, S15 Constitution)
-    Spouse gifts property to other spouse is separate property
-    Income from gift is separate property
•    Presumption in favor of community property – FAM 3.003
-    BOP is clear and convincing evidence to overturn
•    Commingling:
-    Bank accounts: putting inheritance in joint bank accounts
-    Burden on inheritor to prove separate property through tracing
-    BUT “community out first” rule in Texas and “lowest intermediate balance” principle apply to limit recovery
-    Don’t commingle!!
•    Enhancement of separate property using community property funds:
-    E.g. mortgage
-    Creates right of reimbursement/equitable interest
-    How is this valued?  §3.402 FAM in Texas
-    Hypothetical:
-    W has 80K house
-    75K mortgage
-    15K paid
-    60K remaining (gets married at this point) – house valued at 100K
-    30K remaining on mortgage (divorce happens) – house valued at 200K
-    200K – 100K = 100K “enhanced value” – §3.402b
•    But what if value goes down? No enhanced value?
-    100 * §3.402b1 = 30K (paid down by community)/§3.402b2 = 30 + 15 + 5 = 50 (what was paid total)
-    100 * 60% = 60K
-    §3.404 – separate property to enhance Community property or other spouse separate property also generates equitable interest
-    §3.405 – Use and enjoyment of property creates NO equitable interest and no offsetting benefits
-    Community right to reimbursement not impacted by H living in W house
•    Exchange for other (electricity, food) living expenses
-    Also get right to reimbursement for improvements but not maintenance – §3.402c
-    §3.402b1 and b2 include improvements by community property or separate property appropriately but only if also paying mortgage from community property
-    enhanced value <> dollars spent on improvements
•    Debts/Liabilities:
-    Separate property – only owner can incur debts against it – §3.202a
-    Community property subject to tortuous liability of either spouse – §3.202b
•    Agreements to divide/convert from Community property to Separate property
-    Avoids tortuous liability and wages/earnings