The Ins and Outs of Property Division in a Texas Divorce

House split down the middle during a Texas divorce

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No two divorces are ever mirror images of one another, but one term that divorcing couples very rarely avoid is the division of marital property. The State of Texas employs a just and right division of assets, which can mean an equal division, but not always. Each division of marital property is addressed on a case-by-case basis and is determined according to the circumstances involved.

If you are facing a divorce, your financial rights are important, and the best way to protect them is with an experienced Round Rock business property division lawyer on your side.

What Is Community Property in Texas?

Community property (also known as marital property) refers to the assets you acquired while you were married. It doesn’t matter who made the purchase, who paid for the purchase, or whose name is on the lease – if you came to own the asset while you were married, it’s almost certainly marital. There are very few exceptions to community property, and they include the following assets:

Everything else must be addressed in the division of marital property.

What Is Separate Property in Texas?

Separate property refers to any assets that either spouse owned prior to the marriage that were kept separate throughout. A note worth making here is that proving the separate nature of an asset falls to the spouse who claims it as separate. Keeping separate property separate over the course of marriage can prove challenging.

If the separate property increases in value over the course of your marriage, that increase will likely be treated as a marital asset. This situation often applies to retirement accounts and other financial vehicles, business ownership, and property ownership. As such, you should face the division of these assets with a skilled Round Rock divorce lawyer by your side.

Texas Is a Community Property State

Texas is a community property state, which means that the assets you acquire while married belong to both of you, with only a few exceptions. Upon divorce, your community assets must be divided between you fairly. All of the following factors are taken into consideration in this fair division:

  • The separate assets each spouse owns

  • The size of the marital estate

  • The duration of the marriage

  • The contributions each spouse made to the marriage, including homemaking and raising the children

  • The contributions either spouse made to the other’s career development

  • Whether either spouse will receive alimony

  • Each spouse’s level of education

  • Each spouse’s earning potential

  • Each spouse’s current earnings

  • Whether there was any dissipation of marital assets

  • Whether there is a valid prenuptial or postnuptial agreement in place

  • The tax implications of the property division proposed

  • Whether fault played a role in the dissolution of the marriage

  • Any other factors deemed relevant by the court

Texas Separate Property Agreement

Separate property can be addressed directly in a prenuptial agreement. As long as the prenup is created in accordance with the law, the terms included in the agreement are binding and can directly address separate assets. However, the following factors can void a prenuptial agreement:

  • The agreement is unconscionable due to a lack of financial balance.

  • One spouse failed to provide full financial disclosure, and the other didn’t waive this right.

If your divorce involves a prenuptial agreement, your seasoned Round Rock divorce attorney can help you navigate your case and protect your financial rights.

What Qualifies as Dissipation of Marital Assets?

Once the specter of divorce is raised, the matter of dissipation of assets becomes a concern. Dissipation refers to one spouse engaging in actions that lead to lost marital assets. As a result, there is less overall value to distribute between both spouses upon divorce, which harms the other spouse financially.

Is It Dissipation?

When one spouse engages in an expenditure or conveyance of marital assets in anticipation of divorce or for a purpose that is nonmarital in the buildup to divorce, it is considered dissipation. Consider the following basics of dissipation:

  • If one spouse intentionally, recklessly, or negligently engages in a transaction that results in waste, concealment, or conveyance of marital assets, it qualifies as dissipation.

  • If the transaction takes place in anticipation of divorce – rather than in the course of married life – it is dissipation.

  • To be considered dissipation, the transaction must be nonmarital in nature. If the purchase in question is considered marital, such as for clothing or other essentials, the claim of dissipation will not stick.

Married spouses have the right to spend marital assets as they see fit over the course of their marriage, but there are rules and regulations in place that are designed to help protect the financial rights of both spouses in anticipation of divorce.

Unmarried Couples’ Property Rights in Texas

Property rights in Texas can become even more challenging when the couple who is breaking up isn’t married.

Common Law Marriage

Under certain circumstances, a common law marriage is established, but the specifics are exacting:

  • You must meet the criteria for a common law marriage, which include that both of you are at least 18 years old, that neither of you is currently married to someone else, and that you are not related to one another.

  • You lived together as a married couple in the State of Texas.

  • You held yourselves out as a married couple, which means you let other people know you were a married couple.

  • You agreed between yourselves that you were a married couple.

Many people believe that living together for a specific number of years establishes a common law marriage, but this isn’t the case. More intention is required, but there is no minimum amount of time spent living together required. The following factors can help establish a common law marriage:

  • You filed your taxes as married filing jointly or married filing separately.

  • You sought a loan as a married couple.

  • You applied for government services jointly.

  • One of you covered the other as a spouse on employment-based health insurance.

  • You included one another as your beneficiary on financial instruments like life insurance.

If your union is identified as a common law marriage, the division of your marital assets will proceed exactly as it would in a divorce.

Your Property Rights If You Aren’t Married

If you are not married, you won’t be afforded the same property rights as married couples are. When you’re married, it doesn’t matter whose name is attached to a property because the law considers it a marital asset. This designation holds unless either of you can prove it’s a separate asset, which generally means you owned it prior to marriage and kept it separate during the marriage.

If you are in a relationship with someone to whom you’re not married and his or her name alone is on your home’s mortgage – although you share the mortgage payments – your property rights are more limited than they would be if you were married.

FAQ

The division of marital property is often a hotly contested divorce term, and the better you understand the ins and outs of property division in Texas, the better prepared you’ll be to protect your financial rights. If you have questions specific to your case, contact a Round Rock divorce attorney to get the answers you need.

Will Our Assets Be Split down the Middle?

Your Texas community property will not necessarily be split down the middle between you in the event of divorce. Texas employs a just and fair approach to property division, which means it takes the unique circumstances of the marriage and divorce into consideration.

When Does Separate Property Become Community Property in Texas?

Separate property in Texas generally refers to the following kinds of assets:

  • Assets owned prior to marriage and kept separate during the marriage

  • Any gifts or inheritances that either spouse received in his or her name alone during the marriage

  • Any personal injury settlements or court awards for pain and suffering received by either spouse during the course of the marriage

Even when an asset is firmly established as a separate asset to begin with, the following factors can blur the line between separate and marital property:

  • Any intermingling of separate and marital funds

  • The use of marital funds to support, maintain, or grow the separate asset

  • Failure to maintain a separate account for the separate asset

Finally, any increase in the value of the separate asset will likely be treated as community property.

What Is Considered Community Property in Texas?

Community property refers to all the assets that you come to own while married. Texas courts consider all of a married couple’s assets marital unless one spouse can prove the separate nature of a specific piece of property.

How Are Debts Treated?

The assets you acquire while married are considered marital, and so, too, are the debts. Generally, the marital assets are offset by the marital debt before the court fairly distributes the marital property.

What If We Own a Business Together?

Few things can complicate the division of marital property the way business ownership can. Some of the primary complications include the following factors:

  • Obtaining a valuation that you both find acceptable can be very challenging.

  • Selling a business for the sole purpose of divorce generally isn't financially advisable, which can lead to considerable financial loss.

  • The spouse who walks away from the business faces a loss of ongoing income that can be difficult to address fairly with the division of marital assets.

  • If the spouse who is keeping the business can’t cover the other spouse’s ownership with additional assets and can’t obtain a loan to buy him or her out directly, he or she will likely need to buy his or her ex out over time, which makes a clean break that much more difficult.

If you own a business together, a dedicated Round Rock property division lawyer can help.

Will My Retirement Accounts Be Divided during Divorce?

Retirement accounts can become a very complicated issue in a divorce. If you owned your account prior to marriage, the value up to the time of your marriage is a separate asset. Any increase in that value over the course of your marriage is marital and must be divided between you fairly.

The same is true of your spouse’s retirement accounts. Sometimes, these accounts balance each other out, but in other instances, they are seriously lopsided and must be addressed.

Our Assets Are Straightforward. Do I Need an Attorney?

The division of your marital property represents a significant financial concern, and failing to have seasoned legal representation in your corner leaves you vulnerable to an unfavorable outcome. There are tax implications and legal ramifications that you may not be aware of, which makes having legal guidance always in your best interest.

Am I Entitled to Part of My Spouse’s Business?

The bottom line is that even if your spouse owned a business prior to your marriage, you may be entitled to a portion of its value. All of the following factors increase your chances of getting ownership in your ex’s business:

  • The business increased in value over the course of your marriage.

  • Your spouse worked the business without fair compensation – thus diminishing his or her contribution to your shared household.

  • Marital assets were used to maintain or grow the business.

  • Marital and business assets weren’t kept strictly separate.

It’s Time to Consult with an Experienced Round Rock Property Division Attorney

Property division can potentially become a very challenging component of your divorce. Brett Pritchard is a savvy property division lawyer at The Law Office of Brett H. Pritchard – a well-respected property division law firm in Round Rock, Texas. Our practiced legal team is standing by to help you, so please contact us online or call us at (254) 781-4222 to schedule your FREE consultation today.

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