1-1 AN ACT
1-2 relating to the conversion of separate property to community
1-3 property and to equitable and ownership interests in marital
1-4 estates.
1-5 BE IT ENACTED BY THE LEGISLATURE OF THE STATE OF TEXAS:
1-6 SECTION 1. Subchapter A, Chapter 3, Family Code, is amended
1-7 by adding Section 3.006 to read as follows:
1-8 Sec. 3.006. PROPORTIONAL OWNERSHIP OF PROPERTY BY MARITAL
1-9 ESTATES. (a) If the community estate of the spouses and the
1-10 separate estate of a spouse have an ownership interest in property,
1-11 the respective ownership interests of the marital estates are
1-12 determined by the rule of inception of title.
1-13 (b) An equitable interest created by Subchapter E:
1-14 (1) does not create an ownership interest in a
1-15 spouse's separate property; and
1-16 (2) creates a claim against the spouse who owns the
1-17 property that matures on termination of the marriage.
1-18 SECTION 2. Chapter 3, Family Code, is amended by adding
1-19 Subchapter E to read as follows:
1-20 SUBCHAPTER E. EQUITABLE INTEREST OF COMMUNITY ESTATE
1-21 IN ENHANCED VALUE OF SEPARATE PROPERTY
1-22 Sec. 3.401. ENHANCEMENT IN VALUE DUE TO FINANCIAL
1-23 CONTRIBUTION OF COMMUNITY PROPERTY. (a) The enhancement in value
1-24 during a marriage of separate property owned by a spouse due to a
2-1 financial contribution made with community property creates an
2-2 equitable interest of the community estate in the separate
2-3 property.
2-4 (b) The equitable interest created under this section is
2-5 measured by the net amount of the enhancement in value of the
2-6 separate property during the marriage due to the financial
2-7 contribution made with community property.
2-8 Sec. 3.402. USE OF COMMUNITY PROPERTY TO DISCHARGE DEBT ON
2-9 SEPARATE PROPERTY. (a) The use of community property to discharge
2-10 all or part of a debt on separate property owned by a spouse during
2-11 a marriage creates an equitable interest of the community estate in
2-12 the separate property.
2-13 (b) The equitable interest created under Subsection (a) in
2-14 the enhanced value of separate property due to financial
2-15 contributions made with community property is computed by
2-16 multiplying the net enhanced value of the separate property by the
2-17 sum created by dividing:
2-18 (1) the total amount of the payments made by the
2-19 community estate to reduce the principal of the debt on the
2-20 separate property; by
2-21 (2) the sum of:
2-22 (A) the amount computed under Subdivision (1);
2-23 (B) the total amount of the payments made by the
2-24 separate estate to reduce the principal on the debt; and
2-25 (C) the total amount of any additional amount
2-26 spent by the separate estate to acquire the interest in the
2-27 property.
3-1 (c) For purposes of this section, the cost of any
3-2 improvements made to the separate property paid for by either the
3-3 separate or community estate is included as part of the principal
3-4 of the debt.
3-5 Sec. 3.403. APPLICATION OF INCEPTION OF TITLE RULE. (a)
3-6 This subchapter does not affect the rule of inception of title
3-7 under which the character of property is determined at the time the
3-8 right to the property is acquired.
3-9 (b) The equitable interest created under this subchapter
3-10 does not create an ownership interest in property.
3-11 Sec. 3.404. EQUITABLE INTEREST OF SEPARATE PROPERTY ESTATE.
3-12 (a) The separate estate of a spouse has an equitable interest in
3-13 the enhanced value of the separate estate of the other spouse or in
3-14 the enhanced value of the community estate for:
3-15 (1) a financial contribution made to the other
3-16 separate estate or to the community estate; and
3-17 (2) the discharge of all or part of a debt of the
3-18 other separate estate or of the community estate.
3-19 (b) The equitable interest created by this section is
3-20 measured in the manner provided by Section 3.401(b) or 3.402(b), as
3-21 appropriate.
3-22 Sec. 3.405. USE AND ENJOYMENT OF PROPERTY. The use and
3-23 enjoyment of property during a marriage does not create a claim of
3-24 offsetting benefits to the equitable interest created by this
3-25 subchapter.
3-26 Sec. 3.406. EQUITABLE LIEN. On termination of a marriage,
3-27 the court shall impose an equitable lien on community or separate
4-1 property to secure a claim arising by reason of an equitable
4-2 interest as provided by this subchapter.
4-3 SECTION 3. Chapter 4, Family Code, is amended by adding
4-4 Subchapter C to read as follows:
4-5 SUBCHAPTER C. AGREEMENT TO CONVERT SEPARATE PROPERTY TO
4-6 COMMUNITY PROPERTY
4-7 Sec. 4.201. DEFINITION. In this subchapter, "property" has
4-8 the meaning assigned by Section 4.001.
4-9 Sec. 4.202. AGREEMENT TO CONVERT TO COMMUNITY PROPERTY. At
4-10 any time, spouses may agree that all or part of the separate
4-11 property owned by either or both spouses is converted to community
4-12 property.
4-13 Sec. 4.203. FORMALITIES OF AGREEMENT. (a) An agreement to
4-14 convert separate property to community property:
4-15 (1) must be in writing and:
4-16 (A) be signed by the spouses;
4-17 (B) identify the property being converted; and
4-18 (C) specify that the property is being converted
4-19 to the spouses' community property; and
4-20 (2) is enforceable without consideration.
4-21 (b) The mere transfer of a spouse's separate property to the
4-22 name of the other spouse or to the name of both spouses is not
4-23 sufficient to convert the property to community property under this
4-24 subchapter.
4-25 Sec. 4.204. MANAGEMENT OF CONVERTED PROPERTY. Except as
4-26 specified in the agreement to convert the property and as provided
4-27 by Subchapter B, Chapter 3, and other law, property converted to
5-1 community property under this subchapter is subject to:
5-2 (1) the sole management, control, and disposition of
5-3 the spouse in whose name the property is held;
5-4 (2) the sole management, control, and disposition of
5-5 the spouse who transferred the property if the property is not
5-6 subject to evidence of ownership;
5-7 (3) the joint management, control, and disposition of
5-8 the spouses if the property is held in the name of both spouses; or
5-9 (4) the joint management, control, and disposition of
5-10 the spouses if the property is not subject to evidence of ownership
5-11 and was owned by both spouses before the property was converted to
5-12 community property.
5-13 Sec. 4.205. ENFORCEMENT. (a) An agreement to convert
5-14 property to community property under this subchapter is not
5-15 enforceable if the spouse against whom enforcement is sought proves
5-16 that the spouse did not:
5-17 (1) execute the agreement voluntarily; or
5-18 (2) receive a fair and reasonable disclosure of the
5-19 legal effect of converting the property to community property.
5-20 (b) An agreement that contains the following statement, or
5-21 substantially similar words, prominently displayed in bold-faced
5-22 type, capital letters, or underlined, is rebuttably presumed to
5-23 provide a fair and reasonable disclosure of the legal effect of
5-24 converting property to community property:
5-25 "This instrument changes separate property to community
5-26 property. This may have adverse consequences during marriage and
5-27 on termination of the marriage by death or divorce. For example:
6-1 "Exposure to creditors. If you sign this agreement,
6-2 all or part of the separate property being converted to community
6-3 property may become subject to the liabilities of your spouse. If
6-4 you do not sign this agreement, your separate property is generally
6-5 not subject to the liabilities of your spouse unless you are
6-6 personally liable under another rule of law.
6-7 "Loss of management rights. If you sign this
6-8 agreement, all or part of the separate property being converted to
6-9 community property may become subject to either the joint
6-10 management, control, and disposition of you and your spouse or the
6-11 sole management, control, and disposition of your spouse alone. In
6-12 that event, you will lose your management rights over the property.
6-13 If you do not sign this agreement, you will generally retain those
6-14 rights.
6-15 "Loss of property ownership. If you sign this
6-16 agreement and your marriage is subsequently terminated by the death
6-17 of either spouse or by divorce, all or part of the separate
6-18 property being converted to community property may become the sole
6-19 property of your spouse or your spouse's heirs. If you do not sign
6-20 this agreement, you generally cannot be deprived of ownership of
6-21 your separate property on termination of your marriage, whether by
6-22 death or divorce."
6-23 Sec. 4.206. RIGHTS OF CREDITORS; RECORDING. (a) A
6-24 conversion of separate property to community property does not
6-25 affect the rights of a preexisting creditor of the spouse whose
6-26 separate property is being converted.
6-27 (b) A conversion of separate property to community property
7-1 may be recorded in the deed records of the county in which a spouse
7-2 resides and of the county in which any real property is located.
7-3 (c) A conversion of real property from separate property to
7-4 community property is constructive notice to a good faith purchaser
7-5 for value or a creditor without actual notice only if the agreement
7-6 to convert the property is acknowledged and recorded in the deed
7-7 records of the county in which the real property is located.
7-8 SECTION 4. Section 7.002, Family Code, is amended to read as
7-9 follows:
7-10 Sec. 7.002. DIVISION OF PROPERTY UNDER SPECIAL
7-11 CIRCUMSTANCES. In addition to the division of the estate of the
7-12 parties required by Section 7.001, in a decree of divorce or
7-13 annulment the court shall order a division of the following real
7-14 and personal property, wherever situated, in a manner that the
7-15 court deems just and right, having due regard for the rights of
7-16 each party and any children of the marriage:
7-17 (1) property that was acquired by either spouse while
7-18 domiciled in another state and that would have been community
7-19 property if the spouse who acquired the property had been domiciled
7-20 in this state at the time of the acquisition; [or]
7-21 (2) property that was acquired by either spouse in
7-22 exchange for real or personal property and that would have been
7-23 community property if the spouse who acquired the property so
7-24 exchanged had been domiciled in this state at the time of its
7-25 acquisition; or
7-26 (3) the equitable interest, as provided by Subchapter
7-27 E, Chapter 3, of the:
8-1 (A) community estate in the separate estate of a
8-2 spouse;
8-3 (B) separate property of a spouse in the
8-4 separate property of the other spouse; and
8-5 (C) separate estate of a spouse in the community
8-6 estate.
8-7 SECTION 5. (a) Except as provided by this section, this Act
8-8 takes effect September 1, 1999.
8-9 (b) The change in law made by this Act by the addition of
8-10 Subchapter C, Chapter 4, Family Code, takes effect January 1, 2000,
8-11 but only if the constitutional amendment proposed by the 76th
8-12 Legislature, Regular Session, 1999, relating to the conversion of
8-13 separate property to community property, is approved by the voters.
8-14 If the proposed constitutional amendment is not approved by the
8-15 voters, that subchapter does not take effect.
8-16 (c) The change in law made by this Act by the enactment of
8-17 Section 3.006, Family Code, and Subchapter E, Chapter 3, Family
8-18 Code, and by the amendment of Section 7.002, Family Code, applies
8-19 to a suit for dissolution of a marriage pending on September 1,
8-20 1999, or filed on or after that date.
8-21 SECTION 6. The importance of this legislation and the
8-22 crowded condition of the calendars in both houses create an
8-23 emergency and an imperative public necessity that the
8-24 constitutional rule requiring bills to be read on three several
8-25 days in each house be suspended, and this rule is hereby suspended.
_______________________________ _______________________________
President of the Senate Speaker of the House
I certify that H.B. No. 734 was passed by the House on April
27, 1999, by a non-record vote; and that the House concurred in
Senate amendments to H.B. No. 734 on May 26, 1999, by a non-record
vote.
_______________________________
Chief Clerk of the House
I certify that H.B. No. 734 was passed by the Senate, with
amendments, on May 21, 1999, by a viva-voce vote.
_______________________________
Secretary of the Senate
APPROVED: _____________________
Date
_____________________
Governor