At Walters Gilbreath, PLLC, we have seen all kinds of asset variations in the event of a divorce. Once a divorce is filed, clients immediately begin to worry about their children and how property will get divided.
What Will Happen to Your Property in a Divorce?
Ah, money. It makes the world go around, and it also drives much of divorce litigation. It is not the only factor in divorces (because children, sex, power and ego are involved too), but it is a major issue. Texas family law is complex when it comes to property division. It also changes quite frequently, so be careful. Here are some commonly asked questions, and (of course) their answers:
1. What Gets Divided?
Courts can only divide Community Property in a divorce. Community Property is a concept passed down from the Roman Empire to its province of Spain, thru the Spanish Conquest of Mexico, and thru the Mexican administration of Texas. Most states of the Southwest (including California) have a Community Property system, although each is different in the specifics. To sum it up, if it is community property, be prepared to share that property or liability with your spouse. Learn more in our blog, What is Community Property.
2. What is Separate Property?
Separate Property is all property that you own that is NOT Community Property. A Court CANNOT give your Separate Property to your spouse. You take your Separate Property ‘off the top’ of any property division and divide the rest. Learn more in our blog, Community Property vs. Separate Property in Texas.
There can be serious disputes about whether property is Community or not but here are some of the basic rules:
- All property owned by either spouse is presumed to be Community Property. You must overcome this presumption.
- That presumption can be rebutted, but only with ‘clear and convincing evidence’, which can be difficult to produce.
- Certain types of property are easier to prove as being Separate Property.
- A Pre-Nup or Post-Nup can create or maintain Separate Property.
3. Is Texas a Community Property State? Does the 50/50 rule apply?
First off, there is no “50/50″ rule. Texas law requires that the Community Property be divided in a ”fair and just manner’. Often that does mean 50/50, but sometimes 50/50 won’t be a fair and just manner. Some factors that affect the division:
- Fault – Did someone cheat on their spouse? Was someone violent to their spouse? The spouse at fault will likely get less.
- Income Disparity – If one spouse earns $500,000/year and the other is a stay-at-home parent with the kids, you can expect the lower earner to get more of the Community Property. They may even be eligible to receive spousal support.
- Amount of Community Property – The larger the amount of Community Property, the less the deviation from 50/50 will likely be. With estates over $2 Million for example, Courts will try to stick to a 50/50 division.
- Waste – If a husband spent $150,000 over the past 3 years on strippers for example, then the Court can ‘penalize’ him that amount, and then start dividing. If the wife spent $50,000 on extravagant trips with her boyfriend overseas, the court could also ‘penalize’ her in the same way.
- Reimbursement – If a husband spent a lot of his Separate Property supporting the family (buying a house; living expenses, etc.) then he can try to reclaim that as his Separate Property. Even if he is not successful in that, just the fact that he did that will mean that the Court will move things in his favor. This is usually complicated to do so you should contact an experienced family attorney to help you with the process.
- Valuing a Business – The valuation of a business during a divorce can be difficult and yield surprising results. Part of the analysis is that you must ‘back out’ the value created by the spouses in the business, which can often be the entire value of the business. This is particularly true in professional service businesses (such as Law or Consulting Firms, as well as Medical Practices). In more valuable businesses, professional valuation experts will get involved.
- Divorce & Your Business – The divorce process can be very disruptive for a business owner. The Court can essentially become the Chairman of the Board for small companies, dictating compensation practices and requiring the company books to be laid open to the other side. This is true even in cases where the business was formed before marriage or is otherwise Separate Property. In certain cases your divorce lawyer will need to bring in a corporate attorney to help with these issues.
- Alimony/Spousal Maintenance – Although getting Spousal Maintenance (‘Alimony‘) is rare, if that does occur it probably means that the spouse getting it is going to get less of Community Property than would otherwise be the case.
- Pre- or Post-Nup Agreements – The existence or one of these agreement may result in there being no Community Property at all, depending on the terms of them. I recently dealt with a case where a wife had signed a Pre-Nup about 20 years ago that resulted in her getting a $1M instead of $12M.