1-1 By: Goodman (Senate Sponsor - Harris) H.B. No. 734 1-2 (In the Senate - Received from the House April 28, 1999; 1-3 April 29, 1999, read first time and referred to Committee on 1-4 Jurisprudence; May 11, 1999, reported favorably by the following 1-5 vote: Yeas 3, Nays 0; May 11, 1999, sent to printer.) 1-6 A BILL TO BE ENTITLED 1-7 AN ACT 1-8 relating to the conversion of separate property to community 1-9 property. 1-10 BE IT ENACTED BY THE LEGISLATURE OF THE STATE OF TEXAS: 1-11 SECTION 1. Chapter 4, Family Code, is amended by adding 1-12 Subchapter C to read as follows: 1-13 SUBCHAPTER C. AGREEMENT TO CONVERT SEPARATE PROPERTY TO 1-14 COMMUNITY PROPERTY 1-15 Sec. 4.201. DEFINITION. In this subchapter, "property" has 1-16 the meaning assigned by Section 4.001. 1-17 Sec. 4.202. AGREEMENT TO CONVERT TO COMMUNITY PROPERTY. At 1-18 any time, spouses may agree that all or part of the separate 1-19 property owned by either or both spouses is converted to community 1-20 property. 1-21 Sec. 4.203. FORMALITIES OF AGREEMENT. (a) An agreement to 1-22 convert separate property to community property: 1-23 (1) must be in writing and: 1-24 (A) be signed by the spouses; 1-25 (B) identify the property being converted; and 1-26 (C) specify that the property is being converted 1-27 to the spouses' community property; and 1-28 (2) is enforceable without consideration. 1-29 (b) The mere transfer of a spouse's separate property to the 1-30 name of the other spouse or to the name of both spouses is not 1-31 sufficient to convert the property to community property under this 1-32 subchapter. 1-33 Sec. 4.204. MANAGEMENT OF CONVERTED PROPERTY. Except as 1-34 specified in the agreement to convert the property and as provided 1-35 by Subchapter B, Chapter 3, and other law, property converted to 1-36 community property under this subchapter is subject to: 1-37 (1) the sole management, control, and disposition of 1-38 the spouse in whose name the property is held; 1-39 (2) the sole management, control, and disposition of 1-40 the spouse who transferred the property if the property is not 1-41 subject to evidence of ownership; 1-42 (3) the joint management, control, and disposition of 1-43 the spouses if the property is held in the name of both spouses; or 1-44 (4) the joint management, control, and disposition of 1-45 the spouses if the property is not subject to evidence of ownership 1-46 and was owned by both spouses before the property was converted to 1-47 community property. 1-48 Sec. 4.205. ENFORCEMENT. (a) An agreement to convert 1-49 property to community property under this subchapter is not 1-50 enforceable if the spouse against whom enforcement is sought proves 1-51 that the spouse did not: 1-52 (1) execute the agreement voluntarily; or 1-53 (2) receive a fair and reasonable disclosure of the 1-54 legal effect of converting the property to community property. 1-55 (b) An agreement that contains the following statement, or 1-56 substantially similar words, prominently displayed in bold-faced 1-57 type, capital letters, or underlined, is rebuttably presumed to 1-58 provide a fair and reasonable disclosure of the legal effect of 1-59 converting property to community property: 1-60 "This instrument changes separate property to community 1-61 property. This may have adverse consequences during marriage and 1-62 on termination of the marriage by death or divorce. For example: 1-63 "Exposure to creditors. If you sign this agreement, 1-64 all or part of the separate property being converted to community 2-1 property may become subject to the liabilities of your spouse. If 2-2 you do not sign this agreement, your separate property is generally 2-3 not subject to the liabilities of your spouse unless you are 2-4 personally liable under another rule of law. 2-5 "Loss of management rights. If you sign this 2-6 agreement, all or part of the separate property being converted to 2-7 community property may become subject to either the joint 2-8 management, control, and disposition of you and your spouse or the 2-9 sole management, control, and disposition of your spouse alone. In 2-10 that event, you will lose your management rights over the property. 2-11 If you do not sign this agreement, you will generally retain those 2-12 rights. 2-13 "Loss of property ownership. If you sign this 2-14 agreement and your marriage is subsequently terminated by the death 2-15 of either spouse or by divorce, all or part of the separate 2-16 property being converted to community property may become the sole 2-17 property of your spouse or your spouse's heirs. If you do not sign 2-18 this agreement, you generally cannot be deprived of ownership of 2-19 your separate property on termination of your marriage, whether by 2-20 death or divorce." 2-21 Sec. 4.206. RIGHTS OF CREDITORS; RECORDING. (a) A 2-22 conversion of separate property to community property does not 2-23 affect the rights of a preexisting creditor of the spouse whose 2-24 separate property is being converted. 2-25 (b) A conversion of separate property to community property 2-26 may be recorded in the deed records of the county in which a spouse 2-27 resides and of the county in which any real property is located. 2-28 (c) A conversion of real property from separate property to 2-29 community property is constructive notice to a good faith purchaser 2-30 for value or a creditor without actual notice only if the agreement 2-31 to convert the property is acknowledged and recorded in the deed 2-32 records of the county in which the real property is located. 2-33 SECTION 2. This Act takes effect January 1, 2000, but only 2-34 if the constitutional amendment proposed by the 76th Legislature, 2-35 Regular Session, 1999, relating to the conversion of separate 2-36 property to community property, is approved by the voters. If the 2-37 proposed constitutional amendment is not approved by the voters, 2-38 this Act has no effect. 2-39 SECTION 3. The importance of this legislation and the 2-40 crowded condition of the calendars in both houses create an 2-41 emergency and an imperative public necessity that the 2-42 constitutional rule requiring bills to be read on three several 2-43 days in each house be suspended, and this rule is hereby suspended. 2-44 * * * * *