Outside of issues related to your children, if you are going through a divorce then odds are you are most concerned with your property. “Stuff” may not be the most important thing in the world but it does comprise and represent a great deal of the achievements and hard work of our lives. Depending upon when and how that property came to be in your life you may be at risk of losing a portion, or all of it, in your divorce.
That is where yesterday and today’s blog posts from the Law Office of Bryan Fagan come in. We are here to discuss topics related to property in your divorce. Real property, personal property, income and all the categories in between.
How is income generated from separate property treated?
If you or your spouse owns property that is to be considered separately owned by one of you, the income from that property is actually considered community property. However, if you have a premarital or marital agreement in place that says that separate property income is considered the separate property of that spouse then this would be an exception to the general rule. Also, if the separate property was a gift from you to your spouse, the income from that gift is also your spouse’s separate property.
With all of that said, if you own an investment like a stock, bond or mutual fund that earns interest or dividends those earnings are considered to be community property in Texas. As I recommended in yesterday’s blog post, if you are reading this blog and have a significant amount of separate property investments and want all the income from those investments to be considered your property then you are best off negotiating a marital or premarital property agreement with your spouse.
The relevancy of a premarital property agreements in dividing property
Yesterday I mentioned that there is a presumption in Texas family law that all property on hand at the time a divorce is filed in Texas is considered to be community property. This means that if you or your spouse own separate property you will need to be able to prove that it is separate property if challenged by the other spouse. Depending upon how you acquired the property or what you proof you have of its character, this may be a difficult task.
Given the possible difficulty of proving the nature of the property it is a good idea to at least consider entering into a premarital agreement with your spouse on property matters before you even get married. A premarital agreement can remove any question as to how a particular piece of property is to be characterized in a divorce.
You and your spouse are also able to carve out exceptions to the rules regarding separate property income counting as community property and on any other subject you wish. Basically, any property you want to determine to be either community or separate can be done so long as you both agree to it. This is a great way of side stepping the law in favor of working out an agreement that better suits your family.
How do creditors view the property of both spouses?
If you have a contract with a creditor wherein you are loaned money in exchange for paying back that money on a set schedule with interest, then you need to know that this creditor has the right to reach for your separate property and any community property that you manage in order to satisfy their debt claim against you.
This is true when it comes to credit claims against you. What happens if you are sued for a negligence type claim in court? Say you were negligent in doing something and injure another person. That person wins a judgment against you- what property can he or she access in order to satisfy that judgment? Be aware that in this scenario, the judgment creditor can not only access the property that you own separately from your spouse, but also any and all community property in existence. This means that only your spouse’s separate property is safe from a judgment creditor.
For example, if your husband is a doctor you all probably have some sort of agreement or arrangement in place that protects your assets from being seized in the even that he is sued for malpractice. Your home is not subject to being seized by a judgment creditor so you could send your interests to him in the house in exchange for a like amount of community property that would ordinarily be his. Personal assets of yours and your husband would be safeguarded as a result and you both would not be any worse for the ware.
Why it all matters- dividing property up in a divorce
The biggest, most crucial distinction to make when it comes to dividing up property as being community or separate in nature is that it matters a great deal in a divorce. When you get a divorce both you and your spouse are entitled under the law to be able to retain your own separate property. The judge in a trial has jurisdiction to divide your community property but cannot do the same with separate property that either of you own.
Property is to be divided in a just and equitable manner in Texas. Contrary to popular belief this does not mean a 50/50 division, however. Other factors in the marriage such as the age and physical well being of you and your spouse as well as the need for each of you to be supported in the future are relevant for a judge to consider. Also, and perhaps most importantly, if you or your spouse played a role in the breakup of the marriage then this would need to be considered as well.
Pre-marriage planning isn’t delaying the inevitable
A lot of people tend to think that by even considering a premarital agreement on property issues you are “jinxing” the marriage itself or admitting that it is only a matter of time before a divorce is filed. Why else agree to how your marriage will end, as far as what happens with your property? Is it even healthy to consider what should happen to your property in the event of a divorce before you are even married?
After witnessing many a family go through tough times when it comes to dividing up property I would argue that it absolutely does make sense to consider whether a premarital agreement is right for you and your family. If you are entering into a second marriage, or an older person with substantial wealth and property and have a child from a previous relationship that needs specialized care, you may want to consider signing a premarital agreement.
Premarital agreements allow you to negotiate with your spouse to be while you are both happy with one another and able to think clearly on important issues. Consider that if you do need to divorce your spouse it is not always the best environment to have to negotiate with him or her when you are upset and hurt after the filing of a divorce. Having a clear cut understanding of where your property is going and how its getting there can be great from a peace of mind perspective as well. As with anything important as this, it is crucial to be represented while in the negotiation phase so as to learn all options and be able to act on them in your best interests.
Questions on property division issues related to divorce? Contact the Law Office of Bryan Fagan
If you have any questions about the information that we went through today and yesterday please contact the Law Office of Bryan Fagan, PLLC. We offer free of charge consultations with our licensed family law attorneys six days a week. It is always an honor to meet with the people in our community just like you to help answer questions and address concerns directly. Thank you for your interest in this topic and for joining us in this discussion.