Texas is a community property state, and the community property rules affect which assets or interests are included in the deceased individual’s estate if he or she was married at the time of death and lived in Texas.  The policy of Texas law is to treat marriage as a partnership, therefore assets acquired during the marriage will generally be treated under the law as owned and managed equally by both spouses unless the property is separate property.  The way that Texas law defines community property is as a catch all for everything acquired during the marriage except for property acquired by one spouse by gift, devise or descent.




Under Texas law, two factors determine whether an asset is separate property or community property: (a) the date the property was acquired, and (b) the source of funds used to acquire the property.




Texas has a unique rule called the “inception of title” rule, and which requires property to be classified as separate or community property according to the date the property was originally acquired (either before marriage or during marriage).


Under the inception of title rule, anything acquired before the date of marriage continues to be the separate property of a spouse after marriage because it was acquired by the spouse before the date of the marriage.  The use of community funds to improve a spouse’s separate property (for example, a spouse’s separate property real estate), also does not change the property from being classified as separate property (but it does raise the possibility of a right of reimbursement – usually in divorce – by the other spouse for the community funds used to improve the separate property).


If an asset was acquired during a marriage, that asset is presumed to be community property and to belong equally to the spouses; however, this presumption can be overcome by applying the next factor – the source of funds.




Proceeds from the sale of separate property remain separate property, and if the separate property proceeds are later used to acquire an asset then the newly acquired asset is also separate property.  As discussed above, there is a presumption under Texas law that any asset acquired during marriage is community property, so it is essential to document the separate property origins of the funds used to acquire the new separate property asset.


These types of sales and purchases using separate property funds are referred to as “mutations” in separate property.  Mutations in separate property do not affect the separate property character of an asset, as long as the source of payment for the new separate property asset can be traced to its separate property origins.  By way of example, suppose that a spouse’s separate property car (which was originally bought when the spouse was single before the marriage) was later sold and the proceeds are used to cover 100% of the purchase price of another car.   In that case, the new car is also the separate property of that spouse, even if the new car was bought during the marriage, because the car was bought completely with a separate property source.


Again, poor record keeping increases the difficulty of establishing that property acquired during the marriage is separate property of a spouse.  This concept of proving that a separate property interest or asset was obtained using a separate property source of funds is known as “tracing”.


Tracing separate property can become difficult when separate property assets get mixed with community property. In some cases, it is not possible to accurately determine the separate property interest that a spouse owns because of the mixing of separate and community funds in an account or in the purchase of an asset.  This mixing or combining of separate and/or community property of the spouses is described as “commingling” of the assets and may result in the asset being classified as a community property asset because of the insufficient proof that a separate property interest exists.  For example, if separate property funds are added to a community property checking account, then the mixing of separate and community funds and the subsequent use by the spouses may cause the account to be so commingled that it is impossible to prove which funds continue to be separate property.  In such cases, the entire checking account balance may become treated as community property of the spouses.