Before a couple can get a divorce in Texas, one thing that must be resolved is the division of their property and debts. There are multiple steps that must occur during such a division including:
- The assets must be identified. This is typically done by completing a sworn inventory.
- Characterize the property. Before going into characterizing the property, it is crucial to understand that Texas is one of a handful of states that has “community” property.
- Valuation of Assets
- Dividing the Property
This article outlines the process of dividing property in divorce in Texas. Property can either be divided by agreement or by court order.
The first step in dividing marital property during a divorce is to determine the property that is owned by the spouses whether or not it is community or separate property. The local rules of most Texas counties require each party to file an inventory and appraisement and proposed division of property prior to the final trial on the merits of a divorce case.
The Inventory must list each asset and liability of the marital estate, along with the corresponding value and character. Further, the Inventory should detail and value all claims that could impact the property division, including claims for reimbursement and fraud.
The Inventory is then used by the Judge to help formulate what a just and right division of property would be for the spouses. Inventories are not only useful in Trial but are also useful during the divorce process for use in negotiations and mediations when attempting to settle the case.
For these reasons it is important to take all steps necessary to ensure that the Inventory is comprehensive and accurate. This begins at the outset of the case by gathering all relevant documents and information in order to assist in proving the value and character of the marital estate.
Characterization of Property
As Texas courts can only divide the parties’ community property in a dissolution proceeding, the characterization of property as either community or separate is an important second step to the division of marital property in a Texas Divorce.
The Texas Family Code has codified the definition of separate property as follows:
- the property owned or claimed by the spouse before marriage;
- the property acquired by the spouse during marriage by gift, devise, or descent; and
- the recovery for personal injuries sustained by the spouse during marriage, except any recovery for loss of earning capacity during marriage.
The Texas Family Code and case law define community property as follows:
- “Community property consists of the property, other than separate property, acquired by either spouse during marriage.”
The distinction between community property and separate property is important because the court divides the community property between the parties but cannot do so for separate property.
Property possessed by either spouse during or on dissolution of marriage is presumed to be community property. To rebut the community property presumption, a party who asserts the separate property claim must present “clear and convincing” evidence of the property’s separate character.
Valuation of Property
Once an asset is designated as either community or separate property, the parties must prepare to place a value on it. As a general rule, property to be divided in a divorce proceeding should be valued according to its fair market value.
Texas courts must divide the community estate in a manner that results in a just and right division. Before a court can determine whether the division of marital property is "just and right" under Texas law, a value must be placed on each asset.
Often our client’s property, assets and debts include:
- Closely-held businesses
- Limited Liability Companies
- Family trusts
- Professional practices
- Advanced degrees
- Real estate
- Oil wells
- Overseas holdings
- Executive compensation packages
- Student loans
The valuation of community assets can be established by:
- agreement of the parties
- documentary evidence
- by the testimony of the parties, or
- by the testimony of a qualified expert
In most cases, the value assigned to the assets and liabilities of the marital estate should be determined as of the date of divorce, or a date that is as close to the date of divorce as possible. The court has discretion to determine which valuation dates to use.
Sometimes times, valuation of assets make requires experts including but not limited:
- Forensic accountant
- Real Estate Appraiser
- Real Estate Agent
- Business appraisers
Forensic accountant are generally used in cases:
- To trace assets to prove an asset is separate property or community property.
- To help search for undisclosed assets.
- Communicate the significance of certain property or income.
Real Estate Appraiser
If spouses cannot agree on their real property’s value then a spouse can hire a real estate appraiser to give an opinion of value of the property under the current market conditions.
A real estate appraisal involves:
- Obtaining the sales price for comparable properties in the area
- Extrapolating a value for the subject property based on the comparable properties.
Real Estate Agent
Real estate agents can also be used to value real property. Like real estate appraiser they:
- are knowledgeable about the real estate market
- They have access to what properties are for sale or have sold for in the properties neighborhood
Business Appraiser or Business Valuator
If your community property owed by parties includes a business, the business will need to be valued and appraised. A business appraiser often does this evaluation.
The evaluation often includes looking at:
- The business records
- Interviewing the business employees
- Business inventory
Dividing Your Assets – The Just and Right Division
Once the parties have completed their inventories that includes all property and debts and reflects all claims then the spouses are in a better position to begin informed settlement discussions or commence a trial on the division of their property.
If the case goes to trial then the standard a court must follow in dividing the community property of the spouses is “a just and right manner” taking into account the rights of each spouse and any children of the marriage.
However, Under Texas case law a Judge has wide discretion in determining what is “just and right.” A “just and right” division of the community property could be awards to each spouse of 50% of the community property, or a division that grants to one spouse a disproportionate share, of the property.
The court considers several factors in making its decision one what is a “just and right division” of the community assets and liabilities. These factors include: its division are:
- The length of the marriage;
- Each spouse’s level of educational;
- Future business opportunities and
- employability of each spouse,
- The disparity in earning capacities or income;
- Each spouse’s health and physical condition;
- Each spouse’s financial conditions and
- Disparity in the ages of the spouses;
- The existence and size of each spouse’s
- separate estate;
- The nature of the property being divided,
- including liquidity, income production and
- possible tax consequences;
- The existence of children of the marriage;
- Benefits the party not at fault would have
- derived from the continuation of the marriage;
- Fault in the breakup of the marriage,
- including claims of fraud on the community;
- Expenses paid to maintain the community
- estate during the pendency of the case;
- Temporary spousal support paid during the pendency of the case; and
- Attorney’s fees and costs incurred during the litigation
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Other Articles you may be interested in:
- Why is Separate Property Important and How to Keep it Separate in a Texas Divorce?
- What Wikipedia Can’t Tell you About Texas Divorce and Marital Property Division
- Texas Divorce Property Division Enforcement
- Separate Property in a Texas Divorce?
- Does it Matter Whose Name is on Title or Deed of Property in a Divorce in Texas?
- Is Social Security Considered Separate Property in a Texas Divorce
- Business Owners and Business Assets in a Texas Divorce
- What to do when your divorce decree does not include a marital asset?
- High Net Worth Divorce / High Asset Divorce
Law Office of Bryan Fagan | Houston, Texas Divorce Lawyers
The Law Office of Bryan Fagan routinely handles matters that affect children and families. If you have questions regarding divorce, it's important to speak with one of our Houston, TX Divorce Lawyers right away to protect your rights.
Our divorce lawyers in Houston TX are skilled at listening to your goals during this trying process and developing a strategy to meet those goals. Contact Law Office of Bryan Fagan by calling (281) 810-9760 or submit your contact information in our online form. The Law Office of Bryan Fagan handles Divorce cases in Houston, Texas, Cypress, Klein, Humble, Kingwood, Tomball, The Woodlands, Houston, the FM 1960 area, or surrounding areas, including Harris County, Montgomery County, Liberty County, Chambers County, Galveston County, Brazoria County, Fort Bend County and Waller County.