Agreeing to limit or to do away with Community Property
The Texas Constitution now provides that (along with people “about to marry”) “spouses, without the intention of defrauding preexisting creditors may by written instrument… partition between themselves the community interest of one spouse…for the community interest of the other spouse…in other community property then existing or to be acquired.” Further, “the portion or interest set aside to each spouse” shall be that spouse’s Separate Property. And, the income generated by that property can also be agreed to be Separate Property (instead of Community Property).
The Practical Effect of This Kind of Agreement
What this means is that married people (“spouses”) can decide that they do not want to operate under Texas’ Community Property system. Instead, certain property which they acquire will be one spouse’s Separate Property, and other property which they acquire will be the other spouse’s Separate Property. They may or may not agree to keep some property as Community. Spouses who have children from previous relationships, and those who have significant Separate Estates, often find this to be an attractive option for preserving their estates for themselves and their descendants. Importantly, such agreement is invalid if used in an attempt to defraud pre-existing creditors (such as by trying to move property to an estate which those creditors cannot reach).
Right of Survivorship Agreement
As part of their property agreement(s), spouses might also agree that some or all of their Community Property will become the Separate Property of the surviving spouse, upon the death of a spouse. In this regard, it is like a Testamentary Will, except with the advantages of passing property outside of the Probate process. Upon the death of one spouse, the other one automatically becomes the owner of those assets, without any court action being required.
Agreeing to limit or do away with Separate Property
Our Constitution also allows spouses to limit how much, if any, of their property will remain Separate. In other words, spouses might agree that all of their property will belong to the marital community, rather than to either of them separately. In my practice, this option is not nearly as popular as the option of limiting Community Property, discussed above.
Traditionally, the property acquired by married people in Texas was, with few exceptions, Community Property. Our state Constitution now allows married people to change that arrangement, if they would rather have more Separate Property and less (or no) Community Property.