Texas is what is known as a community property state, and while many of the states that use this approach for property division in divorce typically split marital assets down the middle, this isn’t always the case in Texas.
The truth is that property division in a Texas divorce is extremely challenging, and a range of factors can affect the outcome. To protect your financial rights throughout the legal process, working closely with an experienced Round Rock property division attorney from the start is always advised.
What Determines that an Asset Is Community Property?
Community property refers to any assets that you, your spouse, or you and your spouse together acquire while you are married. It doesn’t matter if one of you made the purchase on your own, and it doesn’t matter whose name is on the title or deed – as applicable.
If you came to own the property during your marriage, it’s very likely considered community property, and it will need to be addressed in your divorce. The very few exceptions to this classification practice include the following:
A present that either spouse receives in their name alone
An inheritance that either spouse receives in their name alone
Compensation for pain and suffering that either spouse receives through a personal injury claim
What Determines that an Asset Is Separate Property?
Each spouse keeps their own separate property in a Texas divorce, but determining what is separate and what is marital can be challenging. An asset that you owned when you married and that you kept separate while you were married is yours alone, but any intermingling of marital and separate assets can weaken the line that divides them.
Additionally, any increase in the value of a separate property is likely to be treated as community property.
It’s also important to note that changing the title of an asset to include your spouse’s name during your marriage can change the character of the asset from separate to marital. Even treating an asset as if it belongs to both of you during your marriage can tip the scale from separate to marital.
Finally, if you own a separate asset that generates income, those earnings are very likely to be considered marital. In other words, the matter of identifying separate property tends to be complex.
The Presumption of Ownership in Texas
In Texas, anything you or your spouse acquires while you are married, including when you are living apart prior to divorce if you separate ahead of time, is presumed to be marital property. This presumption is important because if you claim that an asset is separate, you’ll be called upon to prove its separate nature.
The Just and Right Division of Assets
In Texas, courts use their discretion to achieve a just and right – or just and equitable – division of property in divorce, and they arrive at this fair division by considering factors like the following:
The number of years the marriage lasted
Each spouse’s age and overall physical and mental health
The size of any income disparity between the spouses
Each spouse’s level of education and overall employability
The contributions each spouse made to the marriage, including in terms of staying home with the children and in terms of supporting the other’s career
Whether either spouse played a pivotal role in the failure of the marriage – even for no-fault divorces
The tax implications of the property division under consideration
The size of the martial estate and each spouse’s separate estate – as offset by marital and separate debt
Any gifts either spouse gave the other
Any inheritances anticipated by either spouse
Any fraud on the community, which refers to decreasing the overall value of the marital estate in order to keep more for oneself. Examples include spending down, giving assets away, hiding assets, and beyond.
The benefits either spouse loses as a result of divorce, such as inclusion on the other’s health insurance
Texas courts take a big-picture view of the marriage and divorce to arrive at a property division that addresses the unique circumstances involved. Let’s take a closer look at certain primary factors.
The Number of Years the Marriage Lasted
The length of your marriage can feature prominently in how your marital property is divided. For relatively short marriages, which generally means they didn’t make it to the five-year mark, Texas courts attempt to return each spouse’s finances to the level they were at before marriage. From here, any community property acquired throughout the marriage is divided fairly.
For longer marriages, which generally means marriages that last more than ten years, Texas courts typically don’t consider either spouse’s financial standing before marriage. Instead, each spouse’s contributions to the marriage at this point are considered equalized, and the property division continues in accordance with a just and right division.
The Health of Each Spouse
When both spouses are relatively healthy, their physical and mental health isn’t a concern in divorce. If one spouse, however, suffers considerable setbacks with their health, the court is very likely to address their increased need for the division of property. The age of each spouse can also be a factor here.
Health concerns tend to increase as we age, and if either spouse has reached the age of retirement, the fact that they are on a fixed income will need to be addressed.
Each Spouse’s Level of Education and Overall Employability
The court will take notice if one spouse earns considerably more than the other or has the capacity to earn considerably more. Factors such as each spouse’s overall education play a role, but so do matters such as job history and career path.
For example, if one spouse worked in the early days of the marriage to put the other spouse through school and then put their own career on hold while they stayed home to raise the children, it can have a dramatic impact on their ability to earn and, as a result, can affect their share of the marital assets.
Either Spouse’s Fault
If either spouse engaged in bad faith practices, such as having an affair or violating the terms of a valid prenuptial agreement, Texas courts take a dim view. Under these circumstances, the court can allow fewer assets to the spouse deemed to be at fault.
Gifts Made by Either Spouse
As mentioned, the dividing line between a separate asset and a marital asset can be exceptionally fine. If you own a separate asset that you give to your spouse as a gift, you transfer that separate ownership to them. The item doesn’t become marital property but is likely, instead, to be classified as your spouse’s separate asset.
Fraud on the Community
If either spouse engages in misappropriation of marital property during the marriage or in the buildup to divorce, the court will take the matter into consideration. Using community assets for one’s own benefit alone without informing or obtaining the consent of the other can skew how marital assets are divided.
Factors that tend to support a finding of dissipation of marital funds include the following:
The financial transaction was made by one spouse alone – without the other’s knowledge.
The financial transaction was made in anticipation of divorce.
The financial transaction had no marital purpose.
Proving that a Separate Asset Is Separate
In some instances, the effort necessary to prove that a separate asset is indeed separate is worth the effort, and in other instances, it is not. The longer your marriage and the more convoluted the asset’s path over the course of your marriage, the more difficult it can be to prove that it belongs to you alone, and the cost of doing so may not be worth it.
The process of proving that an asset belongs only to you involves tracing its history and its relationship to your marital finances, including any marital funds you put into it and any money generated by it that benefitted you as a family. The more complex this history, the more likely it is that you’ll need to hire a tracing professional, and the more costly the matter becomes.
There are, of course, instances when proving that an asset is yours is well worth the effort, and your seasoned property division attorney will help you make these decisions in relation to your unique case.
For example, if you run a business that has been in your family for generations, you’ll likely want to retain ownership, which makes establishing the degree to which the business is a separate asset and buying out your spouse’s fair share of the amount that’s considered marital important.
It’s important to note that, if you run a business – even a family business that was passed down to you – at least part of it is very likely to be marital property. You earned your living through the business, and those earnings are considered your contribution to the marital estate, which nudges the business closer to a community asset.
FAQ
We don’t have a lot of property to divide. Do I need an attorney?
Regardless of the amount of property you have, your financial rights in the face of divorce are important and can be pivotal in relation to your financial future. The surest means of protecting your property rights is with a savvy property division attorney in your corner.
My spouse and I agree on the matter of asset division. Can we do it ourselves?
You may be in agreement regarding how you will be dividing your assets in divorce, but without a trusted property division attorney on your side, you can’t be sure that your financial rights are well protected. It’s always to your advantage to proceed with professional legal counsel backing you up.
Is my retirement account a separate asset?
Retirement accounts and other financial tools are tricky in relation to property division. If you had the retirement account prior to marriage, the value at the time of your marriage is likely considered separate property, but the amount it’s increased in value since your marriage will be classified as marital.
Cashing in a retirement account for the purposes of divorce rarely makes sense, and the law has tools at its disposal to address this fact. Further, if you and your spouse both have retirement accounts that are of similar value and that are similarly classified in terms of separate and marital property, you can each keep your own and call it a wash.
Other means of addressing your spouse’s entitlement to part of your retirement account include allowing them additional assets that equal their share or buying them out directly – if either is feasible in your situation.
What about debt?
If the debt is community debt, which means either of you or both of you acquired it while you were married, it will be addressed in the same manner that community assets are. Often, marital assets are offset by debts prior to division.
Generally, a student loan that is taken out during the marriage is considered marital. A student loan that either of you took on before marriage, however, is very likely a separate debt.
An Experienced Round Rock Property Division Attorney Is on Your Side
Brett Pritchard at The Law Office of Brett H. Pritchard in Round Rock, Texas, is a well-respected property division attorney who is committed to fiercely advocating for a fair division of property that supports your financial rights in divorce.
We are on your side and here to help, so please don’t wait to reach out and contact us at 254-781-4222 to schedule your free consultation today.