How to Retain Your Separate Property in Divorce

When it comes to writing about the issue of property division in Texas divorce cases the vast majority of the time that hour blog features articles about this subject, they relate to Community property. Community property is the legal theory Involved with how property owned by married people is divided during a divorce. The general theory centers around a presumption that all property owned by you and your spouse at the time of your divorce is Community property and thus divisible by a family court judge. This is a presumption that can be rebutted, however. 

The other type of property involved in a divorce is known as separate property. The separate property would be property owned by you and your spouse before your marriage or property acquired during the marriage either by gift or inheritance. Importantly, separate property cannot be divided by a judge. When going through a divorce one of the most important aspects of a case is learning how to maintain your separate property and not lose it to a division that should not have occurred. 

In today’s blog post from the Law Office of Bryan Fagan, we are going to discuss how to keep as much of your separate property as possible in your divorce. While there are many ways to be able to arrange for you to retain property in a divorce the best way for you to do so is to hire an experienced family law attorney. While we are going to walk you through some scenarios related to Community property division and separate property maintenance in a divorce case the actual circumstances of your divorce may be much more complicated. As a result, I certainly recommend that you learn as much as you can about the process to make well-informed decisions in your case. That process begins with hiring an experienced family law attorney to help guide you.

Our family law attorneys serve folks just like you in our community every single day in divorce and child custody cases throughout Southeast Texas. If you are interested in sitting down with one of our attorneys for a free-of-charge consultation, please do not hesitate to contact our office today. We offer free of charge consultations at both of our Houston area locations, over the phone and via video. Whatever method you choose to take advantage of we will provide you with information and perspective about your case that can go a long way to helping you understand what you are facing in the world that family law and help you to set and achieve goals in your case.

Do not overlook separate property issues in your divorce

So much of the attention in a divorce case is devoted to community property. This is understandably so. Community property is the property that is the divisible type. However, it is still important to be able to consider separate property and your right to hang onto it after a divorce. Separate property cannot be taken from you either by a divorce court or probate court. As such, you need to understand the ins and outs of separate property so that you can be a better advocate for yourself inside and outside the courtroom.

What you need to be aware of is that certain actions that you take both during and before a divorce can impact how separate property is designated. Sometimes this is done through a process called Co-mingling where separate property is kept in a bank account that also has Community property within it. over time as more money is deposited from different sources, the separate property nature of the account can be lost. this is an important aspect of this discussion that many people are unaware of as they head into a divorce case. However, it is important to take note of it to protect yourself and your family moving forward. 

A hypothetical example to illustrate important points about separate property and divorce

Sometimes we can get lost in the details of the law and something can get lost in translation as far as how the law impacts your life. Ultimately that is what matters most in a family law case. The law is just theoretical until it begins to have an impact on your life and how your family will move on from the divorce. So, I wanted to take this opportunity to illustrate some important points about the separate property and how the laws in Texas may impact you and your spouse in a divorce. 

Let’s imagine that you and your spouse were going through a divorce. Your spouse chose to hire a divorce attorney to help guide him in moving through the case. Getting the sort of perspective from an attorney can be a great advantage for your spouse and you if you had chosen to take advantage of the opportunity to hire a lawyer for your case. Otherwise, your divorce may have been a lot more straightforward and less stressful than it ended up being in this hypothetical situation.

In your hypothetical case, I could picture a situation where you and your spouse got married later in life. During the years of your 20s and 30s before getting married, you had worked very hard in building up a fair bit of money to your name and purchased attractive land in the country west of Houston. Since the purchase date of the property was before your marriage then this would in most circumstances be classified as separate property. During your marriage, you created a limited liability company and transferred ownership of the tractive land to that company. You did so to limit liability for yourself and tax purposes.

However, let’s further imagine a circumstance where you directed your limited liability company to transfer ownership of the tract of land back to you while the divorce case was still ongoing. By making this change during your marriage you put yourself in a position where you changed the property from separate to the community in nature. This was true even though the land itself did not change and was the same tract that you had purchased as a single adult before your marriage. This would be the exact kind of situation that I was describing earlier in today’s blog post where you can lose out on quite a bit of property and financial value simply by making decisions without knowing how they would impact your divorce and your life moving forward.

Having the perspective and experience of a divorce attorney would have changed this situation for the better. You could have sat with your attorney and asked him or her how transferring the property back to your name from your limited liability company during the divorce would impact your case. You would likely not have made this transaction how do you know the consequences of doing so. While hiring an experienced family law attorney can be an investment from a financial perspective it can pay dividends for you both immediately and into the future.

How can you potentially avoid a situation like this?

This is a classic commingling situation where you placed the separate property into an account or other setting with community property, thus causing the separate property to lose its separate property nature. You may be facing a situation where there is less money at stake than the one in our above hypothetical situation. However, depending upon the nature of your case you may be facing circumstances where even more money is at stake. No matter what you are going through the fact remains that it can be costly to make mistakes like this. At the very least it can delay your case from settling while you and your spouse haggle over community versus separate property designations. At worst it can not only delay the conclusion of your case but can cost you a great deal of money. Whatever the value of the tract of land in the above example would be you would have to divide that with your spouse. All because you made a mistake with transitioning the property back to your name too early. Mistakes are one thing, but avoidable mistakes are something entirely different. 

Avoiding disagreement and disputes on hefty financial matters seems to be the best way for you to remove yourself and your case from these types of scenarios. The chances of you going through a divorce are what they are. But if you can minimize the scope of your negotiations then it can lead to a faster, less expensive, and more equitable result. Once you get married there are limited options as far as changing the nature of a property from separate to community and vice versa. Even seemingly small changes can result in substantial impacts on your case. 

One way for you to limit the damage and give you some options on how you can handle financial matters is by negotiating your way through a marital property agreement with your spouse. A marital property agreement allows you and your spouse to consider in advance of a divorce the financial issues that you all are likely to face. Rather than consider what you and your spouse are likely to argue about in a divorce, you can remove those issues from consideration by successfully negotiating a marital property agreement. Here is how that could look for you and your spouse.

This process begins with discussing with your spouse. How you initiate that discussion is up to the two of you. Sometimes the discussion could come about as a natural consequence of other conversations about finances. Maybe you have a relative who is going through a particularly nasty divorce and the two of you were considering ways to avoid falling into the same trap. Or, you may have had a loved one pass away recently without a will and you all want to make sure that you have your affairs in order before a divorce puts you in a similar spot. Ultimately, if you can initiate a conversation successfully it will lead to an opportunity to negotiate a marital property agreement.

It certainly helps to agree on most of the financial issues of your life with the person you are married to. If this is the situation that you find yourself in, then you can go through the relevant issues with your spouse and determine settlement options without much argument or disagreement. If nothing else, you can learn more about one another and discover what issues you all may need to think about in detail before a potential divorce. Where do you all disagree when it comes to finances? Where do you agree? What needs to change to agree on the outstanding issues? At the very least you can remove a few issues from a potential divorce where you can avoid potential situations like we talked about earlier in that hypothetical example. 

You don’t have to wait to engage in these discussions until you are married

Depending upon your circumstances it may be possible for you to agree to a property agreement before you and your fiancé even get married. This is known as a premarital property agreement. All of the above discussion regarding marital property agreements also applies to premarital property agreements. The only difference is that you and your finance would potentially agree to terms rather than waiting until you are married. 

I think that the discussions surrounding a premarital property agreement- finances, goals, concerns, etc.- are great jumping-off points for a type of pre-marriage counseling. Why wait to walk through the issues until you are already married? You can address them with your fiancé and nip them in the bud before they become problems for you all as married people. Or you may come to find out that your views on money are so opposite from one another that moving forward with marriage is not in anyone’s best interests. It can be awkward and less than ideal to end an engagement and cancel a wedding. However, it is better to go through these steps now rather than to have to go through a divorce after getting married. 

Premarital property agreements hold the same weight as marital property agreements. Many people in your shoes would have liked to have walked through these financial issues before marriage. For example, what if you owned a business with a substantial amount of debt to its name? While many people think that the business holds this debt and is ultimately responsible for it, this is usually not the case. You stand good for any debt that your business takes out. You are the one who a bank or other lender will look to for payment if the business cannot pay its obligations. With this said, your fiancé and you may want to avoid putting him or her into a position where the lender can look to him or her for payment if something goes sideways. 

In that case, you may want to state in a premarital property agreement that all the debt associated with the business, no matter when it was accrued, will be a part of your separate estate rather than being treated in any situation as part of the community estate. While it may be far-fetched to consider, your spouse may end up being responsible for paying a portion of your business debt in a divorce. To put this type of situation to rest you can negotiate a premarital property agreement that protects your fiancé in this regard. 

Final thoughts on how to retain your separate property in Texas divorce

Diligent record keeping is a good way to avoid putting yourself in a bad situation as far as losing the right to retain your separate property. If there is no question that a piece of property or amount of money is your separate property, then all of the preceding discussion is moot. It does not happen very often that people fight tooth and nail over property that otherwise is the separate property of one spouse or the other. 

Otherwise, if you are in a situation where your property has been commingled with community property and it is too late to negotiate a marital property agreement, your best bet is to work towards hiring an experienced family law attorney. A divorce is not fun, but it does not have to be as painful as it otherwise may be. Consider the short-term and long-term benefits of working with an experienced family law attorney to help prevent a lot of headaches.

Questions about the material contained in today’s blog post? Contact the Law Office of Bryan Fagan 

If you have any questions about the material contained in today’s blog post, please do not hesitate to contact the Law Office of Bryan Fagan. Our licensed family law attorneys offer free of charge consultations six days a week in person, over the phone, and via video. These consultations are a great way for you to learn more about the world of Texas family law as well as how your family’s circumstances may be impacted by the filing of a divorce or child custody case. 

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