MANAGEMENT OF COMMUNITY PROPERTY

In my last few blogs I’ve been discussing the differences between community property and separate property.  The next question spouses often ask is what control do they have individually over property that they own together with their spouse.   Like most legal question the answer is “it depends”.

Under Texas law there are two types of community property: sole-management community property and joint management community property.  Sole-management community property is property that one spouse has the exclusive right to manage, control, and dispose of without the other spouse’s knowledge or consent.  The limits on a spouse’s use of sole management community property are that the spouse cannot fraudulently dispose of the other spouse’s one-half interest and the spouse owes the other a duty as a fiduciary to manage the property with the utmost good faith and fairness.  Generally, sole-management property is the community property that would have been that spouse’s separate property if it had been acquired while the spouse was single. Some common examples of sole-management community property are wages and employment benefits, revenue from separate property, and some types of damages recovered for personal injury suits.

Joint-management community property is property that both spouses must manage cooperatively with equal management rights.  Generally speaking, joint-management community property requires both spouses to give their consent to any transactions involving the transfer or encumbrance of joint management community property. However, spouses can give one spouse the power to unilaterally dispose of joint-management community property if done by written agreement or granting a power of attorney. Some common examples of joint-management community property are property purchased during the marriage with community property or community credit, community property held in the name of both spouses, and income and debts generated from community property.

If the spouses mix sole-management community property with joint-management community property, by using a common bank account for instance, the property becomes joint-management community property.  If one spouse takes on the role of independently running a piece of joint-management community property, like a community owned business, that property still remains joint-management community property.

While the issue of joint-management versus sole-management community property rarely comes up during a marriage, it can become an important issue if the spouses have separated or are in the process of getting a divorce.  If you are going through a separation or a divorce the status of management of the community property will be important in determining what you can and cannot do with the community property and what resources each spouse will have available to them while the divorce is pending.

 

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