If the Siete Partidas was good enough for Alfonso X, King of Castile from 1252 to 1284, then it should be good enough for Texas.
The Siete Partidas was part of the Castilian law developed during the Reconquest of Spain. It set the foundation for community property laws by giving women certain legal rights to persuade them to move to the villages on the frontier.
Community Property Law in Texas
Texas law was influenced by the Siete Partidas from the very beginning. Texas was an early adopter of community property law, which divides marital property into two characterizations: community and separate. Each spouse owns an undivided one-half interest in the community property. Each spouse owns 100% of that spouse’s separate property. The classification of a piece of property is critical to a spouse’s right to certain properties.
Because community property law does not always assure an equitable result, Texas also gives widow’s rights to a person who has lost his or her spouse.
Texas is an outlier. Only eight other states have some form of community property. That means the marital laws of the other 41 states do not work seamlessly with ours.
Community Property Law Agreements
To work around that, and other issues, Texas allows couples to agree to modify the effect of community property law on their estate. There are three basic types of agreements:
- Premarital agreement
- Partition/exchange agreement
- Conversion agreement
Premarital Agreement
In a premarital agreement, the parties can agree to a wide range of matters, such as whether earnings during marriage will be community property, clarifying each party’s right and obligations regarding certain property, limiting or defining obligations upon divorce or death, and defining whether a community estate will arise.
The agreement must be in writing and signed by both parties before marriage. The parties must have the opportunity to receive a fair and reasonable disclosure of the property and debts of the other party before signing. It should be ratified by the parties after their marriage.
Partition/Exchange Agreement
A partition/exchange agreement is made after marriage and is used to convert community property into separate property. Spouses can partition or exchange a present or future interest in property, income, and earnings – which would normally be community property – into separate property. The agreement must be in writing and signed by both spouses and include specific language that the intent is to convert community property into separate property. Each party must have the opportunity to receive fair and reasonable financial disclosure from the other.
Conversion Agreement
A conversion agreement is also made after marriage, but for the opposite purpose: to convert separate property into community property. These are most often used in estate planning purposes because community property has certain taxation benefits upon death.
A conversion agreement must be in writing, signed by both spouses, identify the property being converted, and specify that it is being converted into community property.
A word of caution: merely transferring your separate property to the name of your spouse or both of you does not make it community property. At most, you have just gifted all or part of the property to your spouse as that person’s separate property.
Hammerle Finley Law Firm is Here to Help You Navigate Property Law
All three agreements dramatically impact a spouse’s property and management rights. The agreements should be drafted carefully to meet both constitutional and statutory requirements. No one should sign one of these agreements without full financial disclosure and independent legal advice. The experts at Hammerle Finley Law Firm are here to help. If you’re seeking legal advice before signing a property agreement, contact us today to schedule a consultation.
The concept of community property has worked for the last 800 years. Think carefully before you agree to set it aside.
Virginia Hammerle is an accredited estate planner and represents clients in estate planning, probate, guardianship, and contested litigation. She may be reached at legaltalktexas@hammerle.com. This blog contains general information only and does not constitute legal advice.
