Texas is a community property state. This means that all property and debt that was acquired or earned during a marriage (meaning, from the date of marriage until the date of divorce) is community property, unless one spouse can prove that one or more assets are separate property.
When spouses don’t agree on the separation of assets in a divorce, a judge is obligated to determine a “just and right” division of assets and debts. Read on to learn more about community and separate property, how a division of property is determined in a divorce, and other relate property division topics.
What Is Community Property?
As stated above, community property consists of all the property you and your spouse have acquired during your marriage, unless one spouse proves that some property is separate. This includes houses and other real estate, cars, money (including income, salary, etc), a business, furniture, retirement accounts, and more. If only one spouse’s earnings were used to purchase an item or if the item is in only one spouse’s name, it is still considered community property if it was purchased during the marriage.
In Texas, courts start with the assumption that all property in a marriage is community property.
What Is Separate Property?
Separate property is property that was owned by one spouse before the marriage, property received as a gift or inheritance by one spouse, money one spouse received for personal injuries during the marriage, and stock dividends or capital gains on separate property.
However, if the property is to be considered separate, both spouses must agree that it is separate. If they don’t agree, one spouse must show by “clear and convincing evidence” that the property is separate. If the judge is convinced that the property is indeed separate, it cannot be divided by the court.
What Factors Determine the Division of Property?
Not all property division cases need to go to court. It’s possible you and your spouse can agree on the division of property. In this case, a judge will likely approve your agreement.
If you can’t agree, however, a judge will decide how the property is split. Some people think property should be split 50/50 since it was community property in the marriage. However, this isn’t necessarily fair for both parties. The judge is responsible to weigh several factors of your unique situation:
- Who will have the responsibility of raising the children? Will they need a larger division of property to adequately care for them?
- What are the differences in earning capacities of each spouse? Will one spouse have a harder time earning enough money? For example, a stay-at-home parent who didn’t work for 20 years will have a much harder time earning enough money than a spouse who rose the corporate ladder during that time.
- Where is fault found in the divorce? Some judges may punish for adultery, psychological abuse of the spouse, and more. However, this is becoming less and less of a factor in property division.
- How is the physical condition and health of each party? Will one party require significant ongoing medical expenses that the other will not?
- Is there a significant age difference in the spouses, and will that impact the earning potential of either party?
- What is the relative size of the community estate and the separate estates? Does one partner have a significantly larger amount of separate property and won’t need as much of the community property?
- Has one spouse given money or expensive gifts to a third party or paramour? Most judges frown on this behavior and award the other party a higher share of the community estate.
- What are the tax liabilities and income tax consequences for each party?
- If spousal support has been ordered while the suit is pending, has it been adhered to? If not, this may be remedied by awarding a smaller division of property for the party who has not paid.
- What is the unique nature of the property? Does one item of property have a greater practical value (like a business)?
How Big of a Role Does Conduct Play in the Division of Property?
Fewer and fewer judges punish a spouse with a smaller part of the property for adultery or psychological abuse of a spouse, but it does still happen and depends on the egregiousness of the misconduct and the sensibilities of your particular judge. However,, fraud, spending money on a paramour, squandering money, and other shady financial actions will usually be punished by a lopsided division of the marital property.
What If You’ve Been Separated and Have Obtained New Items?
In the Final Decree of Divorce, each party is awarded personal property in that spouse’s care, custody, or control. This means if you’ve been separated and have purchased new items like furniture and clothing, you probably don’t have to worry about the judge awarding those items to your spouse. However, vehicles, real estate, businesses, jewelry, and financial accounts obtained during a separation will be included in the division of property.
To avoid costly mistakes later, it’s wise to speak to an experienced divorce attorney at the time of your separation about the types of purchases that are safe to make.
What About Retirement Benefits?
Retirement benefits are considered to be community property and able to be divided by the court. This includes pensions, 401 (k) accounts, 403 (b) accounts, profit sharing plans, employee stock ownership plans, Keogh plans, thrift plans, stock option plans, individual retirement accounts, annuities, and variable annuity life insurance.
Be sure to take the proper steps for dividing retirement benefits. They won’t be divided until you have a Qualified Domestic Relations Order (QDRO) signed by the judge and a certified copy sent to the retirement plan administrator. You’ll need to contact the employer or retirement plan administrator for the QDRO form. It’s also important to have your family law attorney review your QDRO form so you don’t give up any benefits that could be yours.
It’s also possible for each party to keep their own retirement benefits instead of dividing them. This doesn’t have to be equal if both parties are in agreement.
How Is the Home Divided?
In Texas, there are no set rules for how the home is to be divided. However, the judge typically rules the children stay in the home, which means the spouse who will be caring for them is typically awarded the marital home. This happens only when it is financially feasible to let one spouse stay in the home.
To divide the equity of the home, one of three scenarios is usually taken:
- The home is sold and the spouses divide the proceeds.
- One party refinances the home and buys out the other party.
- One spouse (likely the custodial parent) lives in the home with exclusive possession for a set period of time. At the conclusion of that time, the spouse will either buy out the other spouse or sell the home and divide the proceeds.
Property division law is complicated, and a simple mistake can cost you dearly. If you are separated or going through a divorce, you need a knowledgeable family law attorney on your side who will help you get what you deserve. Ben Carrasco is experienced in family law and will help ensure you get the best outcome possible. Give Ben a call today at (512) 320-9126, or contact him online.