Divorce is never easy, especially when it comes to dividing assets like real estate. In Texas, spouses must divide property equally unless one spouse committed fraud against the other. However, the specific way that property is divided can vary depending on the circumstances of the case.
In some cases, couples may be able to agree to keep certain items together, such as furniture, appliances, and vehicles, even though they both contributed to those purchases. If you are unsure about how to divide your assets, it is important to consult with an experienced Texas divorce attorney at The Law Offices of Richard C. McConathy.
A Tarrant County divorce attorney can help you understand your rights and options, and can represent you throughout the divorce process. If you are considering filing for divorce, it is important to contact an attorney as soon as possible to discuss your case.
Defining Marital Property
To understand what property you may receive in a Texas divorce, it is important to know the different types of property that are considered by the court. In Texas, property at the time of divorce is divided into three categories: separate property, community property, and mixed property.
Separate property is property that was owned by one spouse before the marriage or was inherited or gifted to one spouse during the marriage. Separate property also includes certain types of personal injury settlements and property acquired by agreement (e.g., premarital or partition agreement).
Community property is property that is acquired or created during the marriage by either spouse, and that is not separate property. This includes income, wages, and assets purchased with income or wages during the marriage.
Mixed property is property that has both separate and community property characteristics. For example, if a spouse uses their own money to buy a house during the marriage, the house would be considered mixed property.
Only community property and the community portion of mixed property can be divided between spouses during a Texas divorce. Separate property cannot be divided by the court.
How Property Gets Divided in a Texas Divorce
There is a common misconception that community property is always divided equally in Texas divorces. However, the law states that community property must be divided in a “just and right” manner, taking into account the rights of each spouse and any children of the marriage. This means that one spouse can receive more than half of the community property in a divorce.
Another common misconception is that each spouse will receive an equal or proportional share of every community property asset. This is not always the case. In some cases, it may make more sense for certain assets to be awarded to one spouse or the other, especially if the community property includes complex assets.
Key Steps Before Property Division in a Texas Divorce
Many spouses starting a divorce case may not feel confident in their financial transparency regarding marital assets and debts. They may also be unsure about how much money they will receive in the divorce or which assets they should pursue in the property division.
It is important to work with an experienced divorce attorney to help you identify, characterize, and value all assets and debts existing in the name of either spouse. Taking these three steps with an experienced attorney is crucial to making informed settlement discussions and receiving a property settlement in your divorce that is specific to your needs and in your best interest.
Just and Right Division
In Texas, community property and debts are divided in a “just and right” manner. This standard is applied on a case-by-case basis, taking into account the specific facts of the parties’ marriage.
In many cases, a just and right division will be a 50/50 split of community property and debts. However, in many other cases, a just and right division may be a “disproportionate division,” in which one spouse receives more than 50 percent of the community estate.
Texas courts consider several factors when determining whether a disproportionate division is appropriate, including:
- Each spouse’s abilities and opportunities
- Disparity in the spouses’ earning incomes
- The nature of the marital property
- The size of the spouses’ separate estates
- Tax consequences of the property division
- Each spouse’s education, age, health, and financial obligations
- The spouse who will be the primary caregiver for the children
- Fault in the breakup of the marriage
- The benefits that the innocent spouse would have received if the marriage had continued
- Whether one spouse dissipated or depleted the marital estate
- Whether one spouse misused marital property
- Whether one spouse received gifts during the marriage or gave excessive community property gifts to others
Proving Separate Property
When a marriage is dissolved by divorce in Texas, it is important to determine whether each asset is community property or separate property. The court must divide the community property and confirm each spouse’s separate property.
To prove that an asset is separate property, a spouse must present “clear and convincing evidence.” This means that the spouse must provide both testimony and documentary evidence to support their claim.
There are two main ways to prove that a property is separate property: through the inception-of-title rule and tracing.
Under the inception-of-title rule, the character of a property is based on the time and manner in which it was acquired. If a person acquires a property before marriage, it is considered separate property regardless of how it was acquired. If a person acquires a property during marriage, it is considered community property unless there is evidence that it is separate property (e.g., property acquired by gift, inheritance, or agreement).
Once a property’s character is established under the inception-of-title rule, it remains the same even if the property changes form (e.g., is sold or exchanged for other property).
Tracing is a method used to prove that a property is a separate property even if it has changed form since it was acquired. To trace a property, the spouse claiming that it is separate property must show that the original property can be traced through all of its mutations to the particular property on hand at the time of divorce. If the spouse cannot trace the property, it will be characterized as community property.
The specific documents that a spouse needs to prove that a property is separate property depends on the type of property. It is important to speak with an experienced divorce attorney to identify the documents that you will need.
Hiring a Forensic Certified Public Accountant (CPA) to Prove Separate Property
If it is not clear from a spouse’s straightforward explanation and a few supporting documents that an asset is separate property, then a forensic CPA should likely be hired to help prove the separate character of the property, especially if the property has a significant value.
Most commonly, a spouse will hire a forensic CPA to prove by the tracing method the separate property character of certain assets.
For brokerage accounts, retirement accounts, and other investment accounts, a forensic CPA will review and analyze the deposits into the account, the changing investments of the account, and income and increases of the account, to trace and confirm the separate property in the account.
Hiring an Expert For a Business Valuation
In every divorce case where the spouses own a business together, it is important to determine the value of the business. Business valuation is not an exact science, but three main approaches are used: the asset-based approach, the market approach, and the income approach.
- The asset approach determines the value of a business by the worth of all of its assets.
- The market approach compares the value of similar businesses in your area that have been sold.
- The income valuation approach estimates the value of the business by considering how much income it generated over a specific time.
When valuing a business, all of the assets will be considered, including the business’s “goodwill.” Goodwill is the value of the business apart from its tangible assets.
In Texas, there are two types of business goodwill: personal goodwill and enterprise goodwill. Personal goodwill is tied to an individual working for the business, while enterprise goodwill is attached to the business itself.
Texas courts have ruled that personal goodwill is not community property and cannot be divided in a divorce. However, enterprise goodwill is community property and must be valued as part of the business valuation.
If you are getting divorced and you or your spouse owns a business with a significant value, you should hire an experienced business valuation expert. Your divorce attorney can help you hire the right expert and gather the relevant financial documents.
Complex Property Concerns in Texas Divorce
If you or your spouse has any complex property, it may be more difficult to characterize and value in a divorce. Types of complex property in Texas divorce cases include:
- Business interests
- Stock options and restricted stock units
- Oil and gas interests
- Pensions and other defined benefit plans
- Certain types of executive compensation, including deferred compensation
It is important to contact an experienced attorney who knows how to deal with complex property matters to make sure your interests are protected.
Dividing the Marital Home Attorney in Tarrant County, TX
Dividing a marital home can quickly become one of the most contentious issues in any divorce, but you do not have to deal with prolonged disputes on your own. The Law Offices of Richard C. McConathy will fight to protect your rights and help you secure the most favorable outcome to your case in Fort Worth, Arlington, Grapevine, Keller, Southlake, or other cities in Tarrant County, TX.
Call (817) 422-5350 or contact us online to schedule a free consultation so we can take the time to look over your entire case and give you the best possible advice for your situation. We understand how domestic violence complicates many cases, and also represent people who have been recently arrested for driving while intoxicated (DWI).