HBA-SEB C.S.H.B. 734 76(R)BILL ANALYSIS Office of House Bill AnalysisC.S.H.B. 734 By: Goodman Juvenile Justice and Family Issues 3/30/1999 Committee Report (Substituted) BACKGROUND AND PURPOSE Currently, a person who is married or about to marry is authorized to enter into a marital agreement converting community property to separate property, but spouses cannot convert separate property to community property. Upon death, separate property is taxed more heavily by the federal government than community property. C.S.H.B. 734 authorizes spouses to agree to convert separate property to community property. RULEMAKING AUTHORITY It is the opinion of the Office of House Bill Analysis that this bill does not expressly delegate any additional rulemaking authority to a state officer, department, agency, or institution. SECTION BY SECTION ANALYSIS SECTION 1. Amends Chapter 4, Family Code, by adding Subchapter C, as follows: SUBCHAPTER C. AGREEMENT TO CONVERT SEPARATE PROPERTY TO COMMUNITY PROPERTY Sec. 4.201. DEFINITION. Provides that "property" has the meaning assigned by Section 4.001 (Definitions): an interest, present or future, legal or equitable, vested or contingent, in real or personal property, including income and earnings. Sec. 4.202. AGREEMENT TO CONVERT TO COMMUNITY PROPERTY. Authorizes spouses to agree at any time that all or part of the separate property owned by either or both spouses is converted to community property. Sec. 4.203. FORMALITIES OF AGREEMENT. Establishes that an agreement to convert separate property to community property is enforceable without consideration and must identify the converted property, specify that the property is being converted to community property, and be in writing and signed by both spouses. Provides that the mere transfer of a spouse's separate property to the name of another spouse or to the name of both spouses is not sufficient to convert the property to community property. Sec. 4.204. MANAGEMENT OF CONVERTED PROPERTY. Provides that property converted to community property under this subchapter is subject to the sole management, control, and disposition of the spouse in whose name the property is held or the spouse who transferred the property if the property is not subject to evidence of ownership, or the joint management, control, and disposition of the spouses if the property is held in the name of both spouses or is not subject to evidence of ownership and was owned by both spouses before the property was converted to community property. Provides exceptions to this section if the agreement to convert the property specifies otherwise and as provided by Subchapter B, Chapter 3 (Management, Control, and Disposition of Marital Property), and other law. Sec. 4.205. ENFORCEMENT. Establishes that an agreement to convert property to community property is not enforceable if the spouse against whom enforcement is sought proves that the spouse did not execute the agreement voluntarily or did not receive a fair and reasonable disclosure of the legal effect of converting the property to community property. Provides that when a specific statement or a substantially similar statement is used in an agreement, the statement is rebuttably presumed to give a fair and reasonable disclosure of the legal effect of the conversion the conversion of property to community property if the wording is prominently placed in bold-faced type, capital letters, or underlined. Provides the wording for such a statement regarding exposure to creditors, loss of management rights, and loss of property ownership. Sec. 4.206. RIGHTS OF CREDITORS; RECORDING. Establishes that a conversion of separate property to community property does not affect the rights of a preexisting creditor of the spouse whose separate property is being converted. Authorizes a property conversion to be recorded in the deed records of the county in which a spouse resides and of the county in which any real property is located. Provides that a conversion of separate property to community property is constructive notice to a good faith purchaser for value or a creditor without actual notice only if the agreement to convert the property is acknowledged and recorded in the deed records of the county in which the real property is located. SECTION 2. Effective date: January 1, 2000. Provides that this Act takes effect only upon the passage of the constitutional amendment proposed by the 76th Legislature, Regular Session, 1999, relating to the conversion of separate property to community property. SECTION 3. Emergency clause. COMPARISON OF ORIGINAL TO SUBSTITUTE The substitute modifies the original in SECTION 1 by modifying proposed Section 4.205, Family Code, to provide that an agreement to convert property to community property is rebuttably presumed to provide a fair and reasonable disclosure of the legal effect of the conversion if a specific or substantially similar statement is prominently displayed in bold-faced type, capital letters, or underlined, rather than in conspicuous print on the same page as the signature of the spouses. Sets forth the language of the statement in all capital letters, rather than without all capital letters. The substitute modifies the original in SECTION 2 by changing the effective date from January 1, 1999 to January 1, 2000.