Inception of Title Rule – Texas Divorce Attorney
How does the court decide the classification of property upon its division? States differ on answering this question, however, Texas is a community property state that has adopted the inception of title rule.
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Community Property Presumption
In Texas, there is a rebuttable presumption that all property owned by either spouse at the dissolution of a marriage is considered community property. According to Tex. Fam. Code Sect. 3.003(a) the statute states: “Property possessed by either spouse during or on dissolution of marriage is presumed to be community property.” This presumption may be rebutted by clear and convincing evidence to the contrary.
The Inception of Title Rule
Oftentimes, to rebut the presumption that a property is community property, courts will look to the character of the property at the time the person first acquires an interest in the property—this is referred to as the inception of title rule.
In general terms, property acquired before the marriage is considered separate property. While, property acquired during the marriage – unless by gift, decent, or devise—is considered community property.
It is monumentally important to note that once a character of property is acquired, that character does not change even if the form of the property changes. That sounds like a mouthful, but let’s illustrate with an example.
Consider a man purchases a home with his separate property before the marriage. If the man sells the home during the marriage and purchases a car with the same funds of the sale, the new car will remain his separate property. This is so because of the inception of title rule. The first home was purchased with the man’s separate property; the fact that the man bought the car during the marriage does not automatically make the car community property because it was purchased with funds that where characterized as separate property at the time of acquisition.
Bottom line is, the form of the property does not change its character.
How does the Court Determine the Character of the Property?
The court uses a method called tracing to determine the character of the property at the time of its acquisition. Tracing means tracing the funds back to the time it was originally acquired from its current state. (See Community Property vs. Separate Property in Texas Article).