Is Texas an Equitable Distribution or Community Property State?
Texas is a community property state. In Texas, it is presumed that all property in the possession of the spouses at the time of divorce is community property. Community property that is earned or acquired during the marriage (known as community property) will be split among the parties in a just and right manner during the property division process, unless some other legal contract such as a pre- or post-nuptial agreement specifies otherwise.
Importantly, a Court cannot divest a spouse of his or her separate property interests, which are not subject to division during the divorce.
During a divorce, the division of property must be "just and right" in the eyes of the court. Multiple factors, such as the health of each party, the circumstances of the divorce, and the outcome of alimony, the size of a spouse’s separate property estate, and child-related responsibilities, can all impact how the court divides property.
The court does not necessarily need to decide the outcome of your property division case. If you can draft an agreement with your soon-to-be-ex determining how to divide property and the court approves said agreement, you can finalize the division of assets and debts without the court's help. Property disputes during divorce are often resolved during the mediation process. The team at Diggs & Sadler has a wealth of experience mediating and resolving property disputes among spouses.
What Assets Commonly Factor into Complex Property Division Cases?
Parties who own valuable property often wonder how the property division process may differ for them.
Some high-value assets that can impact the outcome of a property division case include:
- Oil and gas interests. Mineral rights can be valuable. Whether the court considers mineral rights in your case as separate or community property determines who can develop the land, draw materials from it, and obtain royalties if they lease the property.
- Stock options and company stock. Under Texas Family Code, all or a portion of stocks and shares earned or acquired during a marriage qualify as community property, meaning both parties can come away from the divorce with some stock.
- Family businesses. Whether a business is community property or separate property depends on when a the business was started and what funds may have been used to start the business. Parties may often disagree on the value of a family business (usually, the parties hire different financial experts to valuate the business and then negotiate a value). After establishing a value, the parties have multiple options, including:
- One party buying the other out;
- Continuing to operate as co-owners;
- Dividing the business into two entities;
- Selling the business; and,
- Dissolving the business entirely.
- Trusts and family limited partnerships. Whether courts consider property held in trusts or family limited partnerships community property can largely depends on when the trust was created. Property in trusts developed pre-marriage is typically regarded as separate property, but trusts drafted during the marriage may be considered community property.
Working with one of our Houston complex property division attorneys can help you safeguard valuable assets and liabilities during your divorce, so you maintain financial stability post-property division.
Fraud & Hidden Assets During Complex Property Division Cases
The value of property in complex property division disputes can sometimes entice parties to deceive the court (or attempt to) and seek a more favorable property division judgment than they are entitled to receive.
As part of the property division process, each party must disclose all of their community and separate property to the court and to the other party. This helps the court make appropriate decisions during the property division case and other divorce-related processes, such as custody and alimony disputes.
Sometimes, one party attempts to hide assets from the court. Typically, individuals employ this strategy to make themselves appear less wealthy than they are to obtain a better outcome during property division or avoid distributing certain assets.
Individuals may also try to commit fraud to achieve a similar result. Two types of fraud commonly seen during property division cases are:
- Actual fraud. Actual fraud involves one spouse attempting to intentionally deceive the other to prevent them from knowing about or using property. For example, a spouse who owns a business may funnel revenue through an employee or relative to make the business appear less profitable than it actually is and obtain a better judgment during property division.
- Constructive fraud. During property division, couples have a "fiduciary duty" not to waste or dispose of marital assets until the case concludes. When a spouse breaches the fiduciary duty and wastes or destroys property, it's a form of fraud.
Utilizing Financial Experts During Divorce
Frequently, couples involved in complex property division disputes utilize financial experts to achieve a better outcome in their case.
Some ways to utilize financial experts include:
- To establish the monetary value of certain property at issue;
- To help an individual budget for the divorce and understand what to expect from certain processes like filing for taxes post-divorce;
- To act as an expert witness, supporting an individual's statements about the value or purpose of property; and
- To prevent another party from committing fraud or hiding assets through the use of forensic accounting.
Working with your lawyer at Diggs & Sadler to employ a financial expert is an excellent way to ensure you remain in good financial health throughout and after the divorce.
Dividing Property Across Jurisdictions
Frequently, parties engaged in a complex property division case own assets and liability across multiple jurisdictions.
When property such as real estate is owned in multiple jurisdictions, local laws affect the division of that property. For example, if you own $125,000 of real estate in Puerto Rico, Puerto Rico property division laws may affect the division of that property.
Disputes involving property that is located in states other than Texas, or even in other countries, often involve more complex issues. At Diggs & Sadler, our Houston complex property division attorneys have the legal acumen and knowledge to help you find the best path forward in your case.
To schedule a consultation with our team, contact us online or via phone at (713) 766-5355.
