In case of potential divorce (possibly within the next couple of years), would I have any claim to a house my spouse bought prior to our marriage? We are actively in the process of selling it, and funds from our joint money-market savings account have been used toward renovation in preparation to sell.
There were many expenses, such as replacing all the carpeting, adding new siding, fixing the foundation, etc. My name is not on the deed to that rental home, but we have been married 15 years, and to reiterate, joint funds were used to prepare it for the market. We live in Texas. I wondered if I would be able to gain a portion of the profit when the home sells.
The Wife
Dear Wife,
There are three parts to your question: Do you have an ownership stake in the house? Will you get access to those funds now? And what will happen if you divorce?
Yes, you will have an ownership stake in the house if you divorce. If you and your husband used joint funds to make significant renovations to the house, you will have commingled it from being separate property to commingled property. Whether you get access to those funds after the sale depends on where your husband decides to deposit the proceeds; he could put that money into a bank account without your name on it. If you divorced, a judge would decide the extent of your ownership in the house and would take that into account when splitting your assets.
“In Texas, the court uses a tracing method to determine how much commingled property is separate and how much is marital property,” according to the law offices of Kary L. Key in Weatherford, Texas. “This can be a complex process that requires careful analysis of bank statements, financial records, and other documents. The court will typically look at how the assets were obtained and when they were acquired.” If your husband used the proceeds from this sale to buy another home, that means he would be using marital funds to buy another house during your marriage.
Commingled property in Texas is not automatically divided 50/50 in a divorce.
Texas is a community-property state, which means that property acquired during the marriage is marital property. That brings us to the nuts and bolts of commingled property in Texas. It’s not automatically divided 50/50 in a divorce, the law firm says. “Instead, the court will use a ‘just and right’ approach to divide the property. ‘Just and right’ essentially means a fair and equitable manner. This means that the court will look at how long the couple was married, what each spouse contributed to the marriage, and the earning potential of the spouses.”
You will need to show the receipts: bank statements, receipts for work done, wire transfers to contractors, etc. Texas is one of nine community property states in the U.S., with the others being Arizona, California, Idaho, Louisiana, Nevada, New Mexico, Washington and Wisconsin. Community-property laws vary in each of these states, but they also cut both ways. For example, in those states, the debts one spouse accrues during a marriage are also typically divided in a divorce.
Talk to your husband and tell him that you want to receive some funds from the sale of the house. He may be receptive, or he may simply want to refund you the amount you contributed. “Using an inheritance to pay for home renovations can transform it into commingled property,” says the law office of Bryan Fagan, which has offices across Texas. “Similarly, depositing separate funds into a joint account for shared expenses can undermine their separate status [or using] community income to improve or pay off separate property, such as a house owned before marriage.”
If you divorce, you would have a strong hand.
Related: ‘It’s been a scary ride’: My family has $800K in stocks. We lost 2 years of market gains in a few weeks. Do we sell — or buy?
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