When someone marries into a family that owns and operates a business, there can be questions as to whether the new spouse has any rights or claims to the family business.
Imagine the scenario where parents create a business and gift shares to their child. Their child then gets married. The couple is married for several decades. The husband continued to work for the business and the income from the business supported the couple throughout their marriage. When the child dies, his spouse asserts that she is entitled to part of the business assets. There was no pre or post marital agreement as to the business. The husband leaves the business to his son from a prior marriage via his will. The will is admitted to probate. Does the spouse have any rights or interest in the business?
The court addressed this fact pattern in Estate of Mitchell Boyd Wilson, Deceased, — S.W.3d —-, 2025 WL 2458629 (Tex. App.—San Antonio 2025, no pet.). The case provides an opportunity to consider these questions about separate property businesses and community property claims.
Facts & Procedural History
The decedent worked for a construction company that was started by his first wife’s father. He received his shares in the construction company as a gift in 1991–eleven years before his 2002 marriage to his second wife.
The decedent remained married to his second wife until he died in 2021. Throughout their nearly twenty-year marriage, the decedent served as shareholder, director, and employee of the family business while his son Alex from his first marriage eventually joined the company.
The decedent’s will reflected his intention to keep the family business within his bloodline. He left his second wife one dollar with the remainder of his estate passing to Alex and his other children from his first marriage. Alex became the estate executor and filed the will for probate administration in 2021.
The second wife immediately challenged multiple aspects of the estate proceedings. She filed a plea in abatement, contested the will’s validity, sought family allowances, and requested venue changes. Her challenge that is the subject of this article is a petition for declaratory judgment filed in 2023–nearly two years after the decedetn’s death.
The surviving spouse’s declaratory judgment claims focused on community property claims. She claimed that the construction company’s income, profits, and dividends constituted community property belonging to both spouses. She asserted community property rights in a ranch that the construction company had purchased with corporate funds. Finally, she demanded reimbursement for the decedent’s unpaid labor, arguing that his inadequate compensation from construction company enhanced his separate property at the community’s expense.
The estate responded with several motions for partial summary judgment between July and November 2023. These motions challenged each community property claim made by the surviving spouse. The probate litigation culminated in a hearing in 2024 where the trial court granted summary judgment entirely in favor of the estate and awarded attorney’s fees exceeding $58,000.
What Does the Texas Estates Code Say About Separate Property?
Texas law presumes all property acquired during marriage belongs to both spouses equally. It is presumed to be community property. The Texas Family Code establishes this baseline rule while carving out specific exceptions for separate property.
Section 3.001 of the Texas Family Code defines separate property as property owned before marriage, property acquired during marriage by gift or inheritance, and property that represents recovery for personal injury sustained during marriage. In this case, this definition essentially decided the dispute as to the construction company stock that the decedent received as a gift from family members in 1991–eleven years before his marriage to the second and surviving spouse.
The separate property classification extends beyond the original gift to encompass the natural increase in value of separate property. Income generated by separate property typically maintains its separate character unless the owning spouse takes specific actions to convert it to community property. This principle can be difficult to evaluate when it comes to closely-held businesses where the spouse actively participates in operations.
As in this case, dividends provide an example of these difficulties. When a corporation declares dividends on shares owned as separate property, those dividend payments retain their separate character. The spouse receiving dividends has no obligation to share them with the marital community unless they choose to commingle the funds or make an explicit gift to the community estate. Suffice it to say that most dividends are commingled when they are distributed as they are put into a community account with other community funds.
Absent commingling, this highlights the difference between separate property appreciation and community property enhancement. The mere fact that separate property increases in value during marriage does not automatically create community property rights. Instead, courts examine whether community resources, including spousal time and effort, contributed to the increase in value beyond normal market appreciation.
Why Does Corporate Structure Matter for Property Rights?
The corporate form separates shareholders and corporate assets and fundamentally alters community property analysis. Texas Business Organizations Code Section 2.101 grants corporations the powers of individuals, establishing their existence as separate legal entities distinct from their owners. As for assets, shareholders own stock in the corporation rather than direct ownership interests in corporate assets.
A spouse’s community property rights can attach to the stock itself if acquired during marriage, but usually cannot reach through the corporate veil to claim direct ownership of corporate property.
Think about a simple example. When a corporation owns a building worth $500,000, shareholders cannot claim direct ownership of that building or portions of it. Instead, their ownership interest exists in the corporate stock, which may reflect the building’s value but does not grant direct property rights. The building belongs to the corporation, not to individual shareholders.
The Wilson court emphasized this fundamental principle by noting that “property owned by a corporation is neither the separate nor the community property of the shareholders; it is simply a corporate asset.” This rule applies equally to corporate earnings, undistributed dividends, and profits that remain within the corporate structure. The corporate entity shields these assets from direct community property claims unless exceptional circumstances warrant piercing the corporate veil.
Courts have consistently applied this separation principle across different types of corporate assets. Real property purchased by the corporation belongs to the corporate entity regardless of funding sources or shareholder involvement in the purchase decision. Similarly, corporate bank accounts, investment portfolios, and business equipment remain corporate property even when shareholders participate actively in business operations.
Can Community Property Claims Ever Reach Corporate Assets?
The corporate separation principle contains limited exceptions that allow community property claims to reach corporate assets under extraordinary circumstances. The most significant exception involves “alter ego” or corporate veil-piercing claims where courts determine that the corporate form serves merely as a sham to hide individual ownership.
Texas courts apply alter ego analysis when shareholders use the corporate form to perpetrate fraud, circumvent legal obligations, or achieve inequitable results. This analysis examines factors such as inadequate capitalization, commingling of personal and corporate funds, failure to observe corporate formalities, and use of corporate assets for personal purposes. The burden of proving alter ego circumstances falls heavily on the party seeking to disregard the corporate entity.
Real-world alter ego situations might include a business owner who treats corporate bank accounts as personal checking accounts, fails to hold required board meetings, or uses corporate assets to pay personal expenses without proper documentation. These actions can demonstrate that the corporate structure lacks substance and serves only to shield assets from legitimate claims.
The second and surviving spouse in this case did not plead alter ego in the litigation. Without alter ego claims, her community property arguments had no mechanism to reach through the corporate structure to claim specific corporate assets. But even then, that may not have been enough. Property that would qualify as separate property if owned individually maintains that character even after successful veil-piercing.
What Is the Jensen Rule for Spousal Labor Claims?
This brings us to the Jensen rule. Texas law recognizes that community estates deserve reimbursement when one spouse’s time, toil, talent, and effort (“TTT&E”) enhances the other spouse’s separate property without adequate compensation. This principle is set out in Jensen v. Jensen, 665 S.W.2d 107 (Tex. 1984). It creates a potential avenue for recovering community property rights even when direct ownership claims fail.
The Jensen framework addresses situations where one spouse works to benefit separate property owned by the other spouse without receiving fair compensation for their efforts. Common examples include a spouse who manages rental properties owned as separate property, works in a family business without adequate salary, or uses community funds to improve separate property real estate.
The Jensen court adopted the rule that the community will be reimbursed for the value of time and effort expended by either or both spouses to enhance the separate estate of either, other than that reasonably necessary to manage and preserve the separate estate, less the remuneration received for that time and effort in the form of salary, bonus, dividends and other fringe benefits.
This rule creates several requirements for successful TTT&E claims. The claiming spouse has to prove the value of uncompensated time and effort expended on behalf of the separate property. This valuation has to exceed what would be reasonably necessary to manage and preserve the separate property in its existing state. The claimant must also show that the separate property actually increased in value due to the uncompensated efforts.
How Did the Court Address Tamara’s Corporate Asset Claims?
The appeals court did not accept the second and surviving spouse’s community property claims. The court noted that corporations exist as separate legal entities with property rights distinct from their shareholders. This eliminated any direct community property claims to corporate assets regardless of their source or use.
The second and surviving spouse argued that the construction company’s failure to distribute income and profits to the decedent constituted a diversion of community property to enhance his separate property interest in the company. She claimed this diversion enabled the company to purchase a ranch and other properties that artificially inflated the decedent’s stock value at the community’s expense. The court rejected this theory as fundamentally inconsistent with corporate law principles.
The court explained that undistributed corporate earnings belong to the corporation rather than to individual shareholders. Shareholders have no right to receive distributions unless declared by the board of directors in accordance with corporate governance requirements. The decision to retain earnings for business purposes, including real estate purchases, falls within normal corporate operations rather than constituting a breach of community property rights.
The court also noted that even if the company had distributed its earnings to the decedent as dividends, those payments would have maintained their separate property character as income from his separate property stock holdings. The community would have no claim to dividend income unless the decedent took affirmative steps to commingle those funds with community property or gift them to the marital community.
The Takeaway
This case highlights how surviving spouses cannot claim direct ownership interests in corporate assets simply because those assets supported the family during marriage or because the owning spouse participated actively in business operations. The corporate form creates meaningful legal barriers that protect business assets from direct community property claims absent extraordinary circumstances like alter ego liability. Absent commingling, this protection extends to corporate earnings, undistributed profits, and real estate purchased with corporate funds, regardless of how those assets might benefit shareholders indirectly.
