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Proving Separate Property in a Commingled Account in Texas Divorce

Property possessed by either party at the time of a Texas divorce is presumed to be community property.  To show that property was instead separate, the presumption must be rebutted by clear and convincing evidence.  If the assets were not maintained separately from community assets, they must be traced back to separate property by showing the origin of the property.  Income earned during the marriage is also community property.

A wife recently challenged a court’s finding that a down payment made from her savings account was made with community funds.  After six years of marriage, the parties filed for divorce.  In the wife’s counter petition, she sought reimbursement to her separate estate for assets she alleged were spent for the benefit of the community estate.

At the hearing, the husband sought half the equity in the marital home and community funds he alleged the wife had deposited into her checking account and given to her adult child. The parties agreed on the value of the home and the amount of the down payment.  The husband admitted the down payment had come from the wife’s savings account, but argued that it came from community property funds that had been commingled into the wife’s savings account.  He testified that she deposited her paychecks into her checking account and transferred funds to the savings account.   He testified the savings account had $162,168.61 at the time of the marriage.  The bank records showed $282,847.69 was in the account before the withdrawal for the down payment.   The husband also testified he had given his wife cash to pay the utilities and half of the mortgage payment.

The husband also testified the wife had withdrawn nearly $300,000 of community funds from her checking account.  He testified she gave her daughter a $300,000 cashier’s check using those funds.  He testified his wife’s former attorney told him she gave the funds to her daughter when he requested an accounting of those funds.  The wife argued the husband was not entitled to a share of the income she earned during the marriage.

Although the wife was served with a subpoena for bank statements and other documentation related to the $300,000, she did not bring the documentation to the hearing.  She also testified that she answered the door when a process server tried to serve a subpoena on her daughter.  She testified she did not give her daughter the process server’s information and told her not to attend the hearing.  She admitted the funds were community property but stated she gave them to her daughter anyway.

In its final judgment, the trial court awarded the husband $68,752.66, representing his 50% of the community interest in the wife’s savings account that the court found was fraudulently removed.  The trial court also found the marital home was community property and ordered it to be put up for sale with the proceeds to be equally distributed between the parties.  The wife was given 15 days to pay the judgment or give the husband a promissory note and security agreement.

The wife did not comply with the order and the court subsequently entered a turnover order and appointed a receiver to sell her assets.  She was ordered to turn over various financial documents and “all checks, cash, securities” and other items constituting leviable, non-exempt property.  She did not comply with the turnover order either.  The receiver moved for enforcement by contempt.  The court ultimately held the wife in contempt.  The court approved the trial court’s final accounting, and the wife appealed.

The wife argued the court erred in not crediting the down payment to her.  Here, there was evidence the wife had deposited community funds into her savings account. When funds are commingled, there is a presumption the community funds are withdrawn first.  Because of this commingling, she would have to trace the funds back to the date of the marriage.  In this case, there was no evidence in the record that the wife had traced the funds to show their separate character.  The appeals court found she had not defeated the presumption that the down payment was made with community funds and affirmed.

As this case shows, funds are not necessarily separate property just because they are in a separate account. If community funds have been deposited into the account, the party must trace the separate funds to show that they were separate.  If you are facing a divorce, the experienced Texas divorce attorneys at McClure Law Group can assist you in identifying and tracing separate assets.  Call us at 214.692.8200.

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