One of the most critical areas in a Texas divorce is that of property division. In any divorce case, there are two categories of subjects that can be negotiated upon by you and your spouse. The first area is child custody and conservatorships regarding children who are under the age of 18. The other major area of a divorce that will almost certainly be an issue in your case is property division. All the property and debts held between you and your spouse will need to be divided in the divorce.
The method that Texas family courts utilize when dividing property is known as Community property. Different states in the country refer to marital property in different ways. Texas is one of a handful of states that utilize Community property principles when dividing property. Understanding the basics of Community property law in Texas is essential for understanding how property will ultimately be divided in your case. Before we can discuss higher-level concepts of Community property and how a judge may divide your property up in your divorce, we should discuss first the basics of Community property law in Texas.
Community property law in Texas
Texas is a community property state when it comes to divorce. This means that the debts and property held by you and your spouse at the time of your divorce are all presumed to be marital property. This is important because the marital property is subject to being divided in the divorce case. However, there are exceptions to the presumption that property held at the time of your divorce is Community property. Separate property is generally classified as any property owned by you or your spouse before your marriage period additionally, any property that was acquired by gift or inheritance during your marriage is separate.
Suppose that you had inherited some antique furniture from your grandmother because of her passing away. If that occurred during your marriage, then that antique furniture would still be properly classified as your separate property. By the same token, if your wife's cousin gifted her $10,000 and the gift was made specifically to her and not to the both of you then this money would technically be the separate property of your wife. However, she would need to make sure that the money was not commingled with Community property dollars, or this designation could be lost.
Depending upon the length of your marriage most if not all of the property that you own could be Community property. This means that the family home, your vehicles, and other property such as real estate and personal belongings could all technically be Community property and thus divisible by a family court judge. At this time, you may be wondering how that seems fair. After all: if you were the spouse who goes out and works every day to earn an income and your spouse stays home to take care of the kids and house shouldn't most of the property be yours, technically?
The reality is that income earned while your marriage from most sources is determined to be community income. It does not matter, for example, that the money was deposited into a bank account only with your name. So long as you earned the income during your marriage from your job that income is just as much your spouse as it is yours. The court does not take into consideration whose name is on the title to a home, who signed the receipt for personal property of some sort, or even who earned the income.
If you are having some trouble wrapping your mind around how this is fair allow me to give you an example of how we could look at it from an equity standpoint. While it is true that you are the spouse who works outside the home and thus earns all the income for your family it is not as if you're spouse does not contribute financially to the family. Think about all the tasks that she may perform at home on behalf of your family. I'm talking about things like cooking, cleaning, helping the kids with their schoolwork, doing laundry, scheduling appointments, making sure the bills are paid and providing transportation to your children.
All these roles have economic value. Imagine a situation where something happened to your spouse, and she was not able to perform these roles in your family. You would have to pay someone to do all these things while you worked. When do you think about it like that, your spouse certainly does perform work activities that have a tangible value? The Community property laws of Texas reflect this reality and allow for your spouse to be able to have an opportunity to retain as much property as is fair and equitable given your circumstances.
One of the overlooked factors when it comes to Community property division in Texas is the issue of the division of debt. Just like property is divisible in a Texas divorce so to our debts. There are probably several reasons why we tend to overlook debt regarding the subject. It may just be that debt is so commonplace nowadays that we don't think of it as much of an issue. However, because debt is increasingly becoming common for families to hold you and your spouse should develop a plan for how to handle debt after your divorce. Here are some tips on how you may want to proceed in that regard.
How to approach debt in your Texas divorce
The first part of this equation is to determine what debts are relevant to your case. There are certain types of debt that you are probably aware of. For example, if you live in a home then you are probably aware of your mortgage, the principal owed as well as your monthly payment amount. Additionally, if you have student loans or credit card debt then these are probably more notable figures that you have been working to pay down or are at least aware of the circumstances surrounding them. What we want to avoid in this situation is being surprised that you owe something that your cases come to an end.
This is completely avoidable but occurs with some regularity. For example, consider a situation where you were unaware of a certain debt held either by you or your spouse at the time of your divorce. While you may have worked through multiple debts as far as how to have them divided in your case if one debt is forgotten about or neglected that may cause a real problem for you and your spouse after the divorce has come to an end. If you forget to include a certain debt in your divorce case a judge will not allow you to reopen the divorce to divide the debt that you recently found out about. Rather, if the debt is in your name, then you will likely be on the hook for it even if you believe it should have gone to your spouse in your divorce case.
How can you avoid situations like this where you find out about debt after your divorce has already ended? The best thing that you can do in this regard is 2 check your credit report and do the same for your spouse if you can. This means that you can jump on the computer and use one of the credit reporting services to simply look at a list of any debts that you have paid, and which debts are currently outstanding. A credit report will give you an amount of debt as well as the creditor. You should verify that each of these debts is one that you are aware of and make attempts to pay on. If you have yet to perform this kind of investigation you should do so immediately.
The reason being is that division of property can only occur once you are aware of what debts are in your name and that of your spouse. Imagine a scenario where your spouse opened a credit card or line of credit in your name without your knowledge or permission. In that case, your spouse may be adding a significant amount of debt to the account without your knowledge. On top of that, if you fail to address this debt during your divorce you will be likely left responsible for that debt because it has your name. A creditor will not care about what your divorce decree says or what you tell them about your divorce case. So long as your name was on the debt you are responsible for it.
This is true even if the debt is addressed in your divorce case. Consider your family home and the home mortgage about this subject. Let's suppose that the mortgage to your home has your name and your spouse’s name on it. However, your spouse desires to remain in the family home after the divorce because she will be named best the primary conservator of the kids. She wants some stability and consistency in the lives of your children and as a result, she would like to live in the house and take over the mortgage payment. This is not an uncommon situation it is not farfetched to think as far as the potential outcome of your case.
Let's discuss some of the issues than may come out of this situation. First, you have the ongoing liability of having your name on the mortgage to a house that you do not live in. The only way that I am aware of where a mortgage company would no longer look to you for payment on a mortgage that bears your name is to have your spouse refinance the loan. This creates an entirely different loan that would have only the name of your spouse on it. The old loan would go away, and you would no longer be responsible for making payments all that load.
However, while parties do include requirements to refinance mortgages in their final decrees of divorce this does not mean that your spouse will necessarily be approved for the refinance. Simply applying to refinance a loan does not mean that your spouse qualifies to do so. If he or she has a low income, low credit score, or otherwise has some condition in their credit history that would not make them suitable for a mortgage in their name then you may be stuck not living in a house but at the same time being liable for paying on a loan to that home. Is there a way to address this potentially negative situation?
Fortunately, the answer to this question is yes. Two documents are typically signed in a situation where one spouse decides to stay in the family home and the other spouse leaves after receiving some portion of the equity in that home. The first step would be for you to sign what is called the special warranty deed. Essentially, you would be transferring your ownership interests in the home to your spouse. This way your name would no longer appear on the deed, and he would have no right to enter the home or otherwise make decisions regarding the property. This document can be filed with the Harris County district clerk with the clerk of your home county.
Next, a deed of trust to secure the assumption would be signed by your spouse. This is the document that would potentially protect you in the event of defaulting all that home loan. What the date of trust a secure assumption does is put you in a position to be able to foreclose upon your spouse if he or she fails to make mortgage payments as required by the terms of your loan. There is a process involved with doing this and it is far from a best-case scenario or complete removal of all liability. However, under the circumstances, this is the method employed by most family law attorneys in Texas. It provides you with some degree of Peace of Mind while allowing your spouse to be able to transition into homeownership as a single adult.
What factors come into play regarding the unequal division of Community property?
To close out today's blog post I wanted to share with you some information on why a property may not be divided exactly in an equal fashion in your divorce. The general answer that people typically give regarding property and taxes is that it is divided equally between spouses. However, this is not always the case. If you and your spouse cannot settle your case out of court, then a family court judge will be brought in to distribute Community property in a just and right manner.
For our purposes, just and right do not mean equal. Just and right, it has more to do with fairness than it does evenness. what are the factors that a family court judge would take into consideration when determining how to divide property is either of your faults in the breakup of the marriage? Texas allows you to get a divorce for no reason at all. This is known as a no-fault divorce however; you may also assert particular fault grounds as to why the divorce is necessary. Examples of fault grounds include abandonment, adultery, cruel treatment, and others. If a judge finds that there is evidence for a particular fault ground, then he or she may disproportionately award property in favor of the innocent spouse.
Next, a family court judge would likely consider the earning potential of both you and your spouse when determining how to divide the property. If you have been the spouse who has worked outside of the home and supported your family, then you likely have a greater income earning potential than does your stay-at-home spouse. This is not to say that your spouse will never have to work or that he or she will be receiving spousal support of some kind. However, unless your spouse also has a substantial amount of separate property to their name then it is likely that a disproportionate division of your community property would occur to allow him or her to remain on their feet after a difficult divorce.
When considering all the different factors that may relate to the division of your community property it is best to have advice that is tailor-made to your situation. This sort of specific, practical, and easy to understand advice can be provided by an attorney with the Law Office of Bryan Fagan
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 about how your family circumstances may be impacted by the filing of a divorce or child custody case.