Calculating the Community Property Claim in Texas When Time, Toil and Talent are Contributed to a Separate Property Business

Abstract

In community property states, a community property claim arises when a spouse devotes efforts during marriage to his or her separate property business. Some states, such as Arizona, California and Nevada, permit divorce courts to select one of two different methods for calculating the community claim. Texas has to date approved only one method. The method now utilized in Texas frequently results in a smaller community clam than would arise in Arizona, California, and Nevada.

This paper outlines the approach now utilized in Texas, and discusses the ways that this approach causes a smaller community claim. Various issues that remain unresolved in Texas are explored, such as (i) whether there can be a community claim if the separate property business does not make distributions during marriage, (ii) what amount of effort will give rise to a claim, (iii) whether a claim is possible only to the extent that the business interest increases in value during marriage, and (iv) whether the prevailing approach has been modified or impliedly overruled by a statute and more recent decisions.

Keywords: time toil and talent, reimbursement