Nine states – Arizona, California, Idaho, Louisiana, Nevada, New Mexico, Texas, Washington, and Wisconsin – are considered Community Property states. That means all assets, purchased or acquired by a couple during their marriage, are jointly earned and are subject to division upon divorce. Gifts and inheritances are an exception this law. If you are specifically given a gift or you inherit a property, it is your separate property, regardless of whether you were married at the time.

How do you prove an asset is separate property and not community property? Texas and some community property states follow what is known as the inception of title rule. California does not follow this rule. To establish a property is separate property under the inception of title rule, you must follow these three steps:

1. Determine the date you first acquired an ownership interest in the property.

This is also referred to as the inception of title date. When did you first acquire rights to the property? It is not the date you procured complete ownership and control of the property, but rather, when did you first gain an interest in the asset? For example, in the purchase of real property such as a home, the inception of title date would be the date you signed the earnest-money contract. It does not matter that on the date you signed the contract, you neither had possession of the real property nor had legal title to the home. Inception of title is related to the beginning of ownership of an asset.

2. What was your marital status at the inception of title date?

If you were single, the property will be considered separate property. If you were married, and the property was neither a gift nor inheritance, it will be considered community property. In Texas, if you were separated, the property will be considered community property (if neither a gift nor inheritance) because separation is not considered marital status in Texas. Separation dates do not matter in Texas.

3. How was the property acquired?

Gift

If the property was acquired as a gift, it is considered separate property.

Inheritance

If the property was acquired as an inheritance, it is considered separate property.

Personal Injury

If the property was acquired as part of a personal injury claim, it is considered separate property.

Agreement

If the property was acquired by agreement, it is considered separate property. There are two types of agreements that fall under this rule – partition/exchange agreements and right-of-survivorship agreements. Partition/exchange agreements are created when spouses agree certain property, already acquired or will acquire, will remain separate property. Right-of-survivorship agreements are created when spouses agree all the property listed in the agreement will become the separate property of the surviving spouse after the other spouse dies.

Cash

Courts presume property purchased with cash during the marriage was purchased with community cash and thus considered community property. To refute this presumption, the spouse must put forth evidence that the property was purchased with his or her own funds.

Credit

Courts presume property purchased with credit during the marriage was purchased with community credit and thus considered community property. To refute this presumption, the spouse must put forth evidence that the property was purchased with his or her own credit.

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