Spouses often have various reasons for transferring real estate between themselves. Reasons may include asset protection strategies, tax record preferences, a desire to make a gift, or a bona fide purchase between spouses. Below is a discussion of methods of transferring real estate between Texas spouses.
Separate Property to Community Property
Converting separate real estate owned prior to marriage or gifted to a spouse to community property is fairly simple. Spouses may agree that all or part of separate property real estate owned by either or both spouses is converted to community property. Tex. Fam. Code Ann. § 4.202 (West). There are various formalities required under the Texas Family Code such as the agreement must be in writing and signed by both spouses. Tex. Fam. Code Ann. § 4.203 (West). Lawyers typically use a Community Interest Special Warranty Deed in Texas to satisfy the formalities required under the code.
Gifts of Separate Property Between Spouses
It is widely accepted that spouses may gift or transfer separate property between themselves. For example, if husband owned a parcel of real estate prior to marriage and signed a deed granting wife an undivided one-half interest in the property, both husband and wife would each own a one-half separate property interest in the real estate.
Community Property to Separate Property
Converting community property to separate property is a bit more complex. Section 4.102 of the Texas Family Code provides that "spouses may partition or exchange between themselves all or part of their community property." While the formalities of the agreement are only that the agreement be in writing and signed by both spouses, it is the actual enforcement of the agreement that is typically the subject of litigation. Tex. Fam. Code Ann. § 4.104 (West). For a partition and exchange agreement to be enforceable, the agreement must be signed voluntarily and the agreement must not be unconscionable. Tex. Fam. Code Ann. § 4.105 (West). Additionally, there are several other requirements combined with the unconscionable analysis that relate to disclosure and knowledge of all assets. Id.
Because of the complexity and uncertainty related to the enforceability of partition agreements, lawyers often use lengthy partition and exchange agreements that attempt to defeat any future contests to the validity of the agreements. Many spouses are simply unable or unwilling to bear the costs associated with a complex partition and exchange agreement. Fortunately, a partition and exchange agreement is not the only method by which transformation from community property to separate property may be achieved. Matter of Marriage of Morrison, 913 S.W.2d 689, 693 (Tex. App. 1995), writ denied (Apr. 12, 1996).
In the Matter of Marriage of Morrison, the court held that a deed from a husband to a wife with no consideration created a presumption that the husband gifted the real estate to wife so that the entire property became wife's separate property. Id. Therefore, many attorneys use carefully crafted deeds as a cost effective method of converting community to separate property between spouses.
Transfers of Texas real estate between spouses can be a very complex process. A competent real estate attorney that has experience in spousal transfers should be consulted prior to any attempted conveyances.
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