real estate

A gift house is not community property

Steve McLindenq_v2.gifDear Real Estate Adviser,
My wife and I got married five years ago in Texas and we still live there. She was given a house as a gift by a relative three years ago and it was put in her name only. Now, I have an ongoing argument with a friend of mine. I say the house would be half mine if we split up due to community property rules, and he says "no way." Who is correct?
-- Johnny C.

a_v2.gifDear Johnny,
Looking a gift house in the mouth, are we?

Well, your argument with your friend is finally settled and I'm sorry to inform you that his "no way" is indeed the way in this case. Even in a community property state like Texas, a house that was inherited or otherwise given specifically to one spouse at any point in the marriage is legally considered "separate property" solely owned by that spouse, barring any separate agreements.

In fact, that's generally the case in all community property states, which besides Texas includes Arizona, California, Idaho, Louisiana, Nevada, New Mexico, Washington and Wisconsin. By the way, Puerto Rico is considered a community property jurisdiction, while Alaska is an opt-in state, meaning married couples have the option of signing agreements making houses and any other assets community property.

Specifically, Texas law says separate property can include gifts from parents, inheritance, businesses or other property acquired prior to marriage. AARP has a short, easy-to-follow primer on basic community property rules that gives you the basics.

I might add that while all these states plus Puerto Rico interpret community property cases somewhat differently, most are pretty uniform in segregating gift and inheritance into the separate property category. For states that don't have community property laws, gifts and the like also are typically not split between divorcing parties. However, the waters can get muddied a little when a spouse sells a gift or inheritance property then commingles the proceeds with the family bank accounts to buy something else.

As an aside, in the event of your spouse's death, she could bequeath that gift house to anyone she wants, including you of course. I might add that spouses don't have to mutually accept community property laws and can always hammer out alternative arrangements for property division through a legal "post-nup" of sorts.

Here's hoping you won't have to worry about property division at any point too soon! And I think you owe your Texas-savvy friend a beverage of his choice.

Good luck.

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