If you are reading this article, then it is likely that you are, either contemplating, or in the midst of, a divorce. The process of divorce brings a range of difficult and complex emotional, legal and financial challenges. While it is important to seek professional guidance in each of these areas, it’s also beneficial to gather information as a frame of reference where possible.
This article seeks to give you a basic understanding of a topic that can be quite complex. Keep this in mind, and be careful not to set your expectations without the counsel of your attorney.
What is “Ours” vs. What is “Mine”
STEP 1: Identify all property owned by one or both spouses
Texas is a “Community Property” state. What does this mean, practically? It means that the court will begin with the presumption that all property and assets acquired during the marriage are jointly owned and therefore subject to a “just and right” division.
However, this presumption is not the end of the discussion: It will be up to each spouse and their respective attorneys to demonstrate proof that will rebut this presumption in order to establish separate property. The benefit of establishing Separate Property is that the court has no authority to award your separate property to your spouse.
NOTE: Any and all property must be disclosed, regardless of how or when it was acquired. Failure to disclose or otherwise conceal property can be found as a “fraud on the community” and will be remedied at the “just and right” division in the final divorce decree. It is up to the court, not you or your spouse to decide what constitutes a fair division. Don’t hide anything-it will come back to bite you!
STEP 2: Characterize the property as either community property or separate property
To begin to understand characterization, we need some working definitions and examples:
Community Property: Property, other than separate property, acquired by either spouse during marriage.
Examples of Community Property:
- Salary and wages of either spouse acquired during marriage
- Income from community assets
- Income from Separate Property acquired during marriage
Community Property Q&A
Q. Our home was purchased during our marriage, but it is in my wife’s name only, can she claim this as her separate property?
Taking title in your wife’s name is not enough in and of itself to overcome the presumption of community property. A legal standard in Texas known as the “Inception of Title” theory states that the character of an asset as either separate or community property is determined at the time the asset is acquired. In other words, if the home is purchased during the marriage, it is presumed to be part of the community estate. However, this can be rebutted with evidence to demonstrate that the mortgage payments have come from separate property, or that the property was a gift from the husband to the wife.
Q. I bought my husband a boat for Christmas using money from our joint bank account; can he try to claim the boat as separate property?
Yes, a gift from one spouse to another, even if purchased with community funds, becomes the receiving spouse’s separate property.
Q. My parents gave us $50,000 as a wedding gift; shouldn’t that be my separate property?
No, because the gift was a wedding gift, it was a gift to BOTH spouses and would therefore be considered Community Property.
Separate Property:
- Property was owned by either spouse before marriage;
- Property was acquired during marriage by gift, will or inheritance;
- There was a written partition or exchange of community property resulting in Separate Property;
- Property was purchased with funds from Separate Property, and this can be proven by tracing
- Tort recovery for personal injury, i.e. resulting disfigurement or pain & suffering
- NOT for medical expenses or lost wages, which would be Community Property
Examples of Separate Property:
- Gift from one spouse to the other
- 401k contributions made prior to marriage
- Real Estate purchased by one spouse prior to marriage
Separate Property Q&A
Q. I used a portion of my inheritance to buy a car; will the car be considered my separate property?
Yes, as long as you can trace the funds used to pay for the car to your inheritance, then the car will be considered your separate property. Your separate property can change forms, i.e. cash to property, property to investment, etc., without losing its character as separate property as long as it can be effectively traced back to its original form. This is called “mutation”.
Q. I used $30,000 from my separate property bank account as a down payment on our $300,000 home, what will happen to that contribution at division?
In this situation, the court would deem the home “mixed” ownership for purposes of characterization. 10% of the home would be considered your separate property, and 90% community property.
Q. The divorce is a result of infidelity on my part; can the court award my separate property to my spouse because of my fault in the divorce?
No, the court has no authority to award your separate property to your spouse. However, fault can be a factor in determining “just and right” division of community property.
How will “Ours” be divided?
STEP 3: Value the community property
If the court is going to make a proper division, it has to know the value of all the property to be divided, including any debt. Accordingly, appraisals and financial experts might be necessary. The more complex the marital estate and holdings, i.e. interests in business entities and pension plans, the more difficult this valuation process becomes.
STEP 4: Make a “just and right” division of the community estate
The standard for division is “just and right”. Practically, courts begin with a 50/50 split. 50/50 does not mean that each asset is divided; rather, it means that the value of the estate as a whole is divided according to this percentage. In other words, wife may keep the $300,000 home and $50,000 boat, but in return, husband retains his 401k valued at $350,000.
This 50/50 baseline can be adjusted by certain factors. A sampling of these factors includes:
- Disability of one spouse
- Greater earning capacity of one spouse
- Custody of children
- Size of one spouse’s separate estate
- Fault
- Fraud on the community estate
Even considering such factors, it is unlikely that you are going to see a greater deviation than 60/40 from the 50/50 baseline.
What Now?
If you’re finding yourself filled with questions, it’s probably time to contact an attorney. An attorney will evaluate the specific facts of your case to help you better understand of the likely outcome of property division in your divorce.
Written by Jennifer Finch
In 2011 the Texas legislature addressed this issue by releasing guidelines courts must apply when determining a custody arrangement. These guidelines are contained in the Texas Family Code, Section 153.253 and include the following factors:
Texas Family Law Blog 