Filing for divorce is one of the hardest things a person might encounter. Displacement of the current living situation, asset division, and the splitting up of a family can be very stressful. And if you live in a community property state, will you receive your fair share of assets? The nuances of property laws must be understood to ensure you receive an equitable distribution. Keep reading to learn more about how Texas views community property and what that means for you.
Texas Is a Community Property State: What Does That Mean for You in Houston, TX?
WHAT IS COMMUNITY PROPERTY?
Texas is a community property state, meaning that some property gained during a marriage will belong to both spouses. During a divorce, all community property must be divided between each spouse so that each spouse gets to keep property and assets when the marriage ends. However, assets each spouse had entering the marriage will be kept when the marriage is over, as these assets do not typically count toward community property.
The Goal of Community Property
The concept of community property was intended to protect spousal rights. This ultimately derives from ancient Roman law. The goal of it is to recognize that spouses can contribute to marriage in different ways and seeks to equalize those contributions. It also serves to provide a basis for division when two spouses cannot agree on how to equitably split their assets.
Examples of Community Property
Items that fall under community property include income from employment, real estate, vehicles, unemployment compensation, liquid assets, and employment benefits accumulated during a marriage. Items that don’t fall under this definition are called “separate property”.
How Debt Is Treated
Debt that is created during a marriage is also community property. Examples of debt are real estate mortgages, credit card debt, outstanding balances on vehicles, loans, including student loans, and medical debts. Depending on the state’s view of community property, debt may be divided equally.
Much like regular community property, it doesn’t matter who acquired the debt. What matters is the date of that debt acquisition and whether or not that date fell during the marriage.
How Employment Benefits Are Treated
Pension, retirement, and other employee benefit plans are also subject to division during a divorce. Any money earned towards employee benefits during the marriage is subject to community property. The nuances of the community property laws will determine how those benefits are divided and awarded to each spouse.
How Businesses Are Treated
If one spouse owns a personal business, that will be considered amongst the assets in a divorce. The value of the business will be determined, a time-consuming task. This value is both the monetary and intangible value that the business is perceived to have. Usually, a certified public accountant and appraiser are hired to determine the value of the business. The value will then be ascertained and potentially divided during the divorce as well.
Quasi-Community Property
Quasi–community property is property that is owned by a couple in a state that does not recognize community property. Quasi-community property is not treated the same way, since it’s not located in a community property jurisdiction.
Separate Property
Separate property is treated differently than community property. Separate property is property that is specifically bequeathed to one person in the marriage, assets that were owned before marriage, or assets awarded to one spouse during a personal injury settlement. For instance, a gift that was specifically intended for only one of the spouses would be considered separate property. Another example is jewelry given to one spouse by the other, like an anniversary ring.
In general, assets that were acquired before the marriage are not considered to be community property and may not be subject to the same division. However, each jurisdiction is different, and in places such as Texas, these assets can be commuted to community property. If a car was originally acquired before the marriage, but then payments were made on it with community income during the marriage, this is an example of a type of asset switched over to community property.
Misconceptions About Community Property
It’s often assumed that any property acquired by a couple during the marriage belongs equally to both partners. However, this is a huge misconception. For instance, if a couple purchases a house in a state that does not recognize community property laws, it is not automatically community property. There are a lot of variables in this mix, but it’s important to understand where the asset resides and when it was acquired.
In addition, it’s possible for a single asset to be both community property and separate property. For instance, if a monetary account co-mingles inheritance money with money earned by both spouses, this falls into both definitions. Rules may vary by jurisdiction and state, and they govern how these assets are treated and split during a divorce.
HOW DOES TEXAS VIEW COMMUNITY PROPERTY?
Texas community property laws indicate that all property and assets acquired during the marriage be considered community property. It doesn’t matter who paid for it nor whose name is on the title or other documentation. What matters is the date of acquisition and whether or not that date fell during the marriage. If an asset awarded to a spouse still has debt associated with it, that spouse is required to assume the balance.
General Community Property Laws
In states and jurisdictions that recognize community property, each spouse in the marriage owns an equal share of the assets. There are nuances to this, however.
Nuances of Texas’ Community Property Laws
In some states, community property is divided exactly in half based on monetary value. In other states, a judge may choose to divide the assets non-equally. This is known as equitable division and works on a presumption of fairness instead of monetary value. This would be done to make considerations for child custody, each spouse’s earning capacity, the cause of the divorce, and other factors. Texas is a state where a judge has the authority to use equitable division.
ARE ALL ASSETS ARE SPLIT 50/50?
No. Even though all assets and property acquired throughout a marriage are considered community property, this does not mean that these assets will be evenly split between both spouses. In Texas, the way community property is split during a divorce is determined by the specific circumstances of the spouses, how and when the asset was acquired, and how much each spouse contributed to the property, among other factors.
The court will typically look at the length of the marriage, the health and education of each spouse, and the separate assets each spouse has to determine the division of community property. The court may also consider the custody of any children, the business or earning potential of each spouse, contributions to the home and marriage by each spouse, and the type of assets being divided when community property is split during a divorce. Being at fault for the divorce may also affect property division.
Premarital Agreement
It can be much easier to divide property and assets when there is an existing premarital agreement that will determine the ownership of businesses, property, and other assets before marriage. With a premarital agreement, there is already legal documentation that states what property or assets will be considered separate in the event of a divorce.
For instance, some premarital agreements will declare that a business is owned only by the spouse, or that the ex-spouse will only be entitled to certain assets if the marriage ends. Ultimately, this can simplify the process the court must take during divorce proceedings. Many lawyers will recommend business owners or spouses with significant assets, such as an inheritance, file a premarital agreement to simplify the division of community property in the future.
Marital Assets as Business Capital
On the other hand, it may be more difficult to determine business property division if there has been any comingling of marital funds for business purposes during the marriage. If marital assets (shared finances, or funds from the separate assets of one spouse) were ever used to fund a business, start a business, or support a failing business, then the business assets may not belong solely to one spouse. In this case, the court will need to look at certain factors, including reimbursement claims, to determine the split of the business assets, if any.
WHAT IF THE PROPERTY OR ASSET DOESN’T BELONG TO BOTH SPOUSES?
During community property divorce decisions, the general assumption is that all assets and property belong to both spouses. However, there may be specific circumstances where one spouse can prove that property is separate, even if the property or asset was acquired during the divorce. If this is true for some of your assets, then you will need to discuss the issue with your legal representative to prove the asset should be considered “separate” rather than “community”.
In this circumstance, you and your lawyer will have the burden of proof, which means you must prove with evidence that the property belongs solely to you. Evidence may include deeds to property, names on bank accounts, including authorized signers, and other documentation that will establish the ownership and operation of an asset was done by only one spouse for as long as the asset has existed.
What Should You Look for in a Divorce Attorney Regarding Property Laws?
When seeking out a divorce lawyer in Texas, it’s especially important to find one that is well versed in the community property laws specific to Texas. As there is much subjectivity with the equitable division action, experience and knowledge are critical here. The choice of lawyer you make may make or break how property is divided. Without a good lawyer, you can make costly mistakes that will impact your financial future.
Do you need assistance with community property laws in Texas? Reach out to Skillern Firm Divorce & Child Custody Lawyers today to speak to our qualified lawyers! We pride ourselves on the success we’ve achieved for past clients. We are conveniently located in both Houston, TX and Sugar Land, TX. Our dedicated, tough family attorneys seek to win the most optimal outcome for you, while also putting you in the best position to move forward in life after your case!
