Marital Property Rights

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Welcome to TRGC’s Internet Conference Training Program. At the end of this seminar, you will be given a password that shows you attended the entirety of this seminar. You will need to send an email to [email protected] with 1) the provided password, 2) the address of the location where you attended the seminar, 3) your escrow license number, and 4) your email address. You must send this email before 5pm tomorrow to receive credit for this seminar!

Marital Property Rights Paul McNutt, Jr. Title Resources Guaranty Company

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How Do You Encounter Requirements for Marital Rights? On Schedule C of any commitment with title vested in an individual or individuals, we require a Schedule C requirement to determine marital status.

A Common Example: “We must determine the marital status of the record owner(s) prior to and at all times subsequent to the acquisition of subject property and require joinder where applicable.” applicable.”

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What if the Party Has Always Been Single? Simply have him/her sign a sworn affidavit that he/she was single and always remained single since acquisition. The party then signs alone.

Do Lenders Require a Spouse to Join? No. Federal laws prohibit lenders requiring anyone else to join on a loan if the applicant qualifies.

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Do Lenders Require a Spouse to Join? Even if the credit requires another person, the lender is prohibited under federal law from requiring the applicant to have a spouse join. Lenders do not share in your responsibility to determine the marital status of the borrower.

Texas Requirements for Joinder of a Spouse: The Texas Constitution Art. XVI, Section 50(b) requires the joinder of a spouse to sell the homestead. The Texas Family Code Section 5.001 requires that even if separate property, a spouse may not sell, convey, or encumber the homestead without joinder of spouse. Texas Home Equity and Reverse Mortgage Constitutional provisions require joinder of the spouse to have a valid lien.

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Inquiring About Marital Status To satisfy these laws, you must make diligent inquiry of parties as to their marital status. Have they been formally married with a license? Do they meet Texas common law requirements for marriage?

Common Law Marriage in Texas Texas Family Code Section 2.401 (a) (2) “…the “…the man and woman agreed to be married and after the agreement they lived together in this State as husband and wife and there represented to others that they were married.” married.”

If the third test is met, the first two are implied. There is no minimum required time.

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Common Law Marriage in Texas Texas is only one of ten states that recognize common law marriage, and it cannot exist if either party is married to another spouse or if the parties are under 18 years of age. Recognized by case law since 1847 in Tarpley v. Poage’ Poage’s Adm’ Adm’r, 2 Tex. 139, 149 (Tex. 1847)

How Do You Know if a Marriage or Common Law Marriage Exists? Did the party bring someone of the opposite sex to the closing? Did any other person call about your closing? Did your party wear a wedding ring? You must be frank and satisfy yourself of the marital status before closing.

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What is Required in a Marital Affidavit? Marital status when property was acquired Each marriage or divorce subsequent Present marital status

Community Property in Texas Texas is one of nine community property states. Texas law presumes that any property owned by a married person is community property. Texas Family Code Sect. 3.003 The burden of proof is on the party who claims that the property is separate property.

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Community Property in Texas All property acquired before marriage is and remains separate property. All property acquired during marriage is community property unless acquired by gift, devise, or descent. Texas Family Code, Sect. 3.002

Inception of Title Rule Property is characterized as “separate” separate” or “community” community” at the time of the inception of that title. Texas Family Code, Sect. 3.403(a) “Inception of title occurs when a party first has a right of claim to the property by virtue of which title is finally vested.” vested.” Strong v. Garrett, 224 SW2d 471 (Tex. 1949). (contract for deed). Carter v. Carter, 736 SW2d 775 (earnest money contract)

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Sole Control and Management Community Property If community property is vested solely in the name of one of the spouses, then it is presumed that they agreed that the one spouse in whose name title is vested has been given sole control and management of the property, and that one spouse can convey both spouses’ spouses’ interests, AS LONG AS IT IS NOT THEIR HOMESTEAD.

Homestead Article XVI Section 50 of the Texas Constitution provides that the homestead shall be protected from all creditors except for those who loaned the money to purchase it, or to pay taxes on it, or for labor and materials to improve it (provided a contract to do so was signed first by husband and wife). We have added five other ways to borrow on the homestead since 1995.

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Homestead Whether a property is homestead or not is a matter of intent. One spouse cannot sell the other spouse’ spouse’s homestead without his or her consent, even if it is the selling spouse’ spouse’s separate property. The cases almost always find in favor of the homestead claimant – even if the claimant signs a nonnon-homestead affidavit!

Joint Management Community Property Requires both spouses join in a conveyance regardless of homestead status. Cooper v. Texas Gulf Industries, Inc., 513 SW2d 200, 202 (Tex. 1974) A deed of joint management community property executed by only one spouse to a third party will not even pass the interest of the signing spouse. Dalton v. Don J. Jackson, Inc., 691 SW2d 765; In the Matter of Morrison, 913 SW2d 689, 692

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Conveyancing From the Grantor’s Point of View Separate property may be conveyed alone unless the property is homestead. Texas Family Code 3.101 Joint management community property requires both spouses to convey. All homestead property, separate or community, requires joinder of spouse. Texas Const., Art. XVI, Sect. 50(b)

Conveyancing From the Grantee’s Point of View All property acquired during marriage is presumed community property regardless of whether one or both spouses are named as grantee(s) on the deed. K.B. v. N.B., 811 SW2d 634, 642 To be separate property, the deed should state “property is sole and separate property” property” and recite the purchase money paid out of grantee’ grantee’s separate funds and estate. Miller v. Evans, Evans, 452 SW2d 426, 430

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Homestead Defined Urban 10 acres as of 1/1/2000 • All one contiguous tract. • Has City services: police, fire, and utilities.

Rural 200 acres • Can be divided tracts. • Property Code Sec. 41.002 defined. • Cannot be waived.

Affidavit of Non-Homestead If the property in fact is not the homestead of the owner and an affidavit of fact is obtained from both the married parties that other property is their homestead, then joinder is not required for property held in title by one party. Be certain the identity offered by the parties also shows the homestead property as the residence and the nonnon-homestead status of your transaction property is shown on the tax rolls.

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Mortgages Joinder of both spouses is not required when mortgaging separate property, unless the property is homestead. Joinder is required when mortgaging joint management community property, regardless of homestead status.

Special Mortgages on Homestead Home equity loans and reverse mortgages are not valid unless signed by all persons in title and their spouses. Texas Const. Art. XVI, Sect. 50(a)(6)(A); Art. XVI, Sect. (k)(1)

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Changing Separate Property to Community Property During marriage, spouses may agree to convert all or part of the separate property owned by either or both to community property. Texas Family Code, Sect. 4.202 The agreement must be in writing, signed by both spouses, contain a legal description, and specify the conversion. Texas Family Code 4.203 The mere transfer to the name of the other spouse is not sufficient to convert. Texas Family Code 4.203(b)

Changing Community Property to Separate Property During marriage, spouses may partition or exchange between themselves any part of their community property into separate property. Texas Family Code Sect. 4.102; Texas Constitution, Art. XVI, Sect. 15 The agreement must be in writing and signed by both parties. To insure, you

must have underwriter approval.

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Joint Tenancy With Right of Survivorship Spouses may at any time agree that all or part of their community property will become the property of the surviving spouse upon the death of a spouse. Texas Const. Art. XVI, Sect. 15; Texas Probate Code, Sect. 451 The agreement must be in writing and signed by both parties containing words of “with right of survivorship” survivorship” in some form. Merely taking title as “joint tenants with right of survivorship” survivorship” will not satisfy the statutory requirement that there be “an agreement.” agreement.”

Insuring After Joint Tenancy Require affidavit sworn to by remaining party of no revocation and of date of death. Require death certificate. Require underwriter approval to insure.

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Divorce Issues Example - couple getting divorce and one wants to buy a new home during the divorce without the spouse’ spouse’s signature. We will insure the loan, but you will have a standard exception on the owner’ owner’s policy for community property rights. (Skelton vs. Washington Mutual Bank, 61 SW3d56 (Tex. App. – Amarillo 2001, no writ)

EXCEPT, we won’ won’t close it if the purchase violates a court order entered in the divorce.

Divorce Issues Example - couple getting divorce and one wants to sell a property without the spouse’ spouse’s signature. We will NOT insure. It doesn’ doesn’t matter if it’ it’s separate or community because court has not determined status of the property.

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Divorce Issues Example - couple getting divorce and one wants to deed the homestead to the other so they can get a home equity loan without the spouse’ spouse’s signature. We will NOT insure. Texas Constitution prohibits loans on homestead without spouse’ spouse’s signature, and they are married.

Divorce Issues Example – divorce decree signed September 1, 2010, and on September 10, 2010, spouse who obtained title to the residence wants to close home equity loan to fund the divorce settlement. We will NOT insure. Divorce is not final for 30 days after decree signed.

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Divorce Issues Couple is going to get a divorce, and they want to deed property from one to the other prior to divorce in order to get the spouse out of title and refinance. We get this request, but if property is characterized by marital status at the time it was received, how can this change it from being community property? Deeding between spouses DURING marriage has no legal effect on title. You need a valid postnuptial partition agreement. So we do not insure.

Divorce Issues There’ There’s no such thing as “legal separation” separation” in Texas. Person is married until the day the divorce decree is signed. Divorce decree is subject to appeal or modification for 30 days after it is signed, so not final. But if parties both join we can insure earlier.

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Divorce Problems No adjudication of title in decree. Title divested by decree, but insufficient legal description. Title divested by decree, but nothing ever filed in real property records. Homestead property and divesting spouse has IRS or other lien filed before the deed divesting him/her.

Solutions: No adjudication of title:

Both spouses still own the property, so you need a deed from BOTH of them.

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Solutions: Title divested by decree, but insufficient legal description:

Require deed from divested party with complete legal description or corrected divorce decree, if recent divorce allows.

Solutions: Title divested by decree, but nothing ever filed in real property records: Record certified copy of the divorce decree (if you can’ can’t get a deed). Be certain personal information not included in decree. Or get specific approval.

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Solutions: Homestead property and divested spouse has IRS lien filed before the deed divesting him/her: Spouse may apply for a partial release from IRS – Innocent Spouse doctrine. For taxes not hers after divorce, on homestead.

Solutions: Homestead property with liens against exex-spouse: Seek partial release using Tarrant Bank vs. Miller 833 SW2d 666, Ct. of Appeals 1992. Attorney prepare. If AJ filed after 99-1-2007, use Sec. 52.0012 Tx. Property Code release procedure. Require attorney to prepare.

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Separate Property After Divorce Review divorce decree for any lien created. If no liens against owner, can insure without divorce decree, title transfer, or deed, as status remains separate property.

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