How Community Property is Handled When Property Was Accumulated Previously in Another State

You were married in another state prior to moving to Texas. Unfortunately, you and your spouse have separated and are seeking a divorce. Which state’s laws apply? Do divorce laws in Texas prevail over out of state divorce laws?

Are you entitled to alimony for the time you were married and lived in the other state? If that state was a common law state, where no community property was created, what happens to property acquired in that state before moving to Texas? Do you have a premarital agreement (often referred to as a prenuptial agreement) from that state and, if so, was there a choice of law provision regarding what law will be applied in the application of the terms of that agreement?

As you can see, there are many jurisdictional issues to consider when divorcing in Texas if you and your spouse lived elsewhere before moving to Texas. an attorney can assist you in navigating these issues to reach a suitable outcome.

 

Alimony

Unless you have a premarital agreement or postmarital agreement with your spouse, or arrive at a settlement with your spouse, Texas cannot award alimony, even if you spent a significant portion of your marriage in a state that could. Divorce laws in Texas only provide for spousal maintenance, which is limited in duration based on the length of the marriage and has a statutory cap on the amount that can be paid. Moreover, in Texas, spousal maintenance is available only to help a spouse meet his or her minimum reasonable needs. The community property laws of the state are deemed sufficient to adequately compensate a spouse for time invested in a marriage, so Texas does not have any statutory grounds for a judicial award of indefinite alimony.

This likely has you wondering how you are to be compensated if you are not entitled to alimony and you have no community property because the majority of the marital assets were earned in another state, and that state would treat those assets as being the sole property of one spouse or the other. The answer to your question is quasi-community property.

 

Quasi-Community Property

The Texas Family Law Code creates a statutory presumption that all property possessed by either spouse during or upon dissolution of marriage is community property. Tex. Fam. Code § 3.003(a). However, it gets a little more complicated if, while you were married, you were domiciled (lived) in another state prior to relocating to Texas. When a couple is divorcing in Texas, property acquired while domiciled in another state is considered community property if that property would have been community property had the parties lived in Texas when it was acquired. Tex. Fam. Code § 7.002(a)(1). This is known as quasi-community property, and its application extends not only to property acquired in other states, but also to property acquired in other countries.

An easy way to think about quasi-community property is to ask yourself the question, “Would this property have been community property at time of acquisition if we had been living in Texas at that time?”

 

Death of a Spouse

Under current Texas law, quasi-community property exists only for the purposes of a division of the marital estate in divorce. If one of the spouses dies, the probate courts will not view the property as quasi-community property. This can be an important consideration even if you are not contemplating divorce, and is worth discussing with an attorney if you or your spouse acquired a large amount of property while domiciled in another state. Otherwise, a surviving spouse may not have sufficient assets for self-support in the event of the other spouse’s untimely death.

 

Real Property Located in Another Jurisdiction or Country

Under divorce laws in Texas, a court cannot award real estate that is not located within its jurisdiction (i.e., real estate in another state or country). What our family courts can do, however, is consider the value of those assets in its division of the community estate. Further, while the court can’t directly award real property outside its jurisdiction, it can order a party to convey that property to the other spouse if the court has personal jurisdiction over that spouse; this allows the court to accomplish the same ends through a different means.

 

Choice of Law – Marital Agreements

Have you and your spouse executed a premarital agreement? If so, does it have a choice of law clause? These clauses specify the divorce laws of which state or country will govern the construction of the agreement and are extremely important to consider when evaluating the effect of the agreement.

 

Challenging and Invalidating a Premarital Agreement

It is extremely difficult to invalidate a premarital agreement in Texas. Under divorce laws in Texas, to invalidate a premarital agreement, a party must prove the agreement is unconscionable (often the hardest requirement to establish) and that there was inadequate disclosure of a party’s assets. However, if there is a choice of law clause, it may allow out of state divorce laws to be applied to review the validity of the agreement, and those laws may be more liberal regarding the invalidation of the premarital agreement. Postmarital agreements are slightly easier to invalidate due to concern over the bargaining strength of the parties once married, but are also difficult to invalidate. Regardless of what type of marital agreement you have, the circumstances surrounding its formation and the effect it has on the parties would need to be reviewed.