The most common word that I will hear associated with the main goal of a divorce from a potential client is “fair.” Most people want the outcome of their case to be a fair one. Not one sided, not so over the top as to favor him or her to complete exclusion of their spouse. Something right down the middle that treats both parties well, bearing in mind whatever circumstances are in play.
That’s all well and good, but if you and your spouse cannot agree upon a settlement to your divorce that likely means that you all do not see eye to eye at all. As such, your definition of fair and your spouse’s definition of fair may not resemble one another by a long shot. How the judge considers your arguments versus those of your spouse will obviously be crucial to how your case is ultimately decided. Just what will a judge be looking for in your case when it comes to dividing up your community estate?
A just and right division is what a court must pursue in your trial
The Texas Family Code mandates that Texas family court judges must approach the issue of dividing your marital estate from the perspective of a just and right outcome. As I’m sure you are already thinking, that does not exactly provide much of a guide to judges as to how they should approach specific issues. To be sure, the family code, as it does in most areas of the law, allows judges to utilize their own experience and sense of right/wrong when making decisions in family law cases.
Let’s start here: the default setting for most judges seems to be that you and your spouse should split equally the marital property that is held between you. Now, if you own a great deal of separate property and your spouse owns very little this may change things. By the same token, if you work in a field where your earning capacity far outpaces that of your spouse then a judge may factor this into the equation as well.
Situations that involve family violence, the specific types of property that are to be divided in the trial, whose fault it was that the marriage is ending in divorce, the relative health of you and your spouse, as well as the factors listed in the prior paragraph, will impact the decision of a judge. Make no mistake- while the judge will start off with the scales of justice exactly even, you and your spouse can add weight to either scale in order to get the scales to tip in your favor.
In my experience handling divorces in Texas, it is uncommon for those scale of justice to ever tip beyond a 60/40 division. There are extreme circumstances that could be in play, and your situation may be one of them, but for the most part, you can expect a nearly 50/50 split in your community property division. I suppose that if we are starting off this discussion by discussing what is "fair," you can't get much fairer than 50/50.
Some property may disproportionately go towards you or your spouse
Depending on what you all want, or are best situated to take on in your post-divorce life, the judge may decide to award you different sorts of property. For example, if your spouse will need more liquid assets (cash) immediately after the divorce to find a new place to live, buy furniture, etc., the judge may award him most of the cash in your bank accounts. Similarly, if you are able to remain in your family home and have a job that willow you to recoup cash quickly, you may be awarded less liquid assets like property or investment accounts.
Dividing up retirement accounts in divorce cases
Your retirement accounts and those of your spouse are considered to be community property to the extent that they are invested into during the course of your marriage. It does not matter that your accounts say only your name and your spouse’s accounts say only their name. The main issue that we as attorney and client have to figure out is how are we going to separate each account to be divided up between you and your spouse.
A Qualified Domestic Relations Order (QDRO) is the legal mechanism by which this will occur. The company who administers your retirement plan (your own or an outside company) will have to review the QDRO to make sure that the language contained within it allows them to divide the retirement account up in the manner ordered by the judge. The date of your marriage, the date of your divorce, the length of your (or your spouse's) employment with the employer and how the money is to be split up will all need to be specified. The administrator will approve the plan language (hopefully in advance of its being signed by the judge) and then see to it that the account is split up accordingly.
Let’s consider an example to better illustrate these points. You have been working at a company for twenty years and have been married to your spouse for ten of those twenty years. The retirement account with your company will be split up 50/50, per the orders of your final decree of divorce. Your plan administrator will then need to figure out how much of your retirement account is separate property and how much of it will be community property.
Your spouse can choose to do a number of things with her 50% portion of the community property share. That money can immediately be distributed to her and will be taxed for getting this money up front. Next, she could decide to roll it into an Individual Retirement Account (IRA) with a company that does such things. In that case, no taxes or penalties would apply. Your spouse can decide to do whatever she wants but must state her intention in the QDRO.
Dividing real estate in a Texas divorce
The next big ticket item that we need to cover as far as property division in a divorce is concerned is that of real estate. Whether we are talking about your home, rental properties, the location that houses your small business or raw land that you own out in east Texas, real estate is possibly your and your spouse’s largest portion of your net worth.
The number one most relevant question when it comes to real estate in a divorce is what will happen with your family home. Most of you reading this blog post own home with your spouse. Either that house will be sold or it will remain with one of you individually, with the other moving out. If the former option is chosen that equity will need to be divided up between the two of you.
Of course, you may want to keep the home but in order to do so, it must be shown that you can afford to make the payments on that home. Suppose that you are a mother who will be named as the spouse who gets to determine the primary residence of your kids. Just because the kids will be living with you on a full-time basis does not mean that you also get to keep the house. If you can afford the mortgage payments, taxes, insurance and other costs of maintaining a home a judge may award you the property. Otherwise, that house will be sold in all likelihood.
Next, if your name and your spouse’s name both appear on the mortgage then it will behoove the person staying in the home to refinance the note into their name only. Keep in mind that just because a final decree of divorce states that it is your spouse’s responsibility to pay the mortgage moving forward, does not mean that your legal liability to pay ends. That mortgage company doesn’t care what your divorce decree says. You signed up for the mortgage and you will continue to be responsible to pay. Missed payments on the loan by your spouse can spell doom for your credit.
Otherwise, if the houses are to be sold in your divorce then you will need to find out how your spouse wants to divide up the responsibility to pay for repairs/upgrades/etc. in order to get the house to be more marketable. We all have parts of our home that need work to a lesser or greater degree. The decision to paint the back of the house, replace siding, install a new A/C unit and re-grout the guest shower all have costs associated with them. You and your spouse can negotiate these costs in mediation and them ratify them in your final decree of divorce.
Finally, you will need to decide what realtor you will use to market the home and how that realtor is going to be communicated with. These may seem like little issues, but they can quickly become important if there is miscommunication going on. In what could be the most important financial transaction that occurs in conjunction with your divorce you want to make sure that there are no misunderstandings.
Selling the family home before your divorce is over with
You and your spouse are free to discuss the sale of your home before the divorce is even over with. In some markets, it may not make sense to wait to get the house ready for sale and to hire a realtor. If there is a "hot" market, then putting the house up for sale early may allow for better offers to be received. Most of the time I would advise that you and your spouse have an agreement in place as far as splitting the equity is concerned. However, if you do not have an agreement perfected the money can always be held in trust by your attorney or your spouses until the time that an agreement is reached.
What happens if you get the house but cannot refinance the mortgage?
Suppose that as a part of your divorce you were awarded the family home. This is great because you also are the primary caregiver for your kids and you really do not want to force them to have to relocate immediately following a tough divorce. The mortgage bears the names of you and your spouse. However, after attempting to refinance the mortgage to remove your spouse’s name you were denied. Is this a problem that could potentially sink the divorce agreement that you and your spouse had in place? Or can something be done to assist you all in these circumstances?
This is an important question that I have been asked many times by clients and potential clients alike. Since it is so important I am going to wait until tomorrow in order to answer the question given the limited amount of space we have remaining in today’s blog post. Please join us tomorrow to discuss the topic of property division in a divorce further, and to learn more about what could happen in this scenario.
Questions about divorces in Texas? Contact the Law Office of Bryan Fagan
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