Property division is an important aspect of most divorces, but the distribution of community property assets and debts between spouses takes on special importance in Texas because of our state’s limitation on availability, amount and duration of spousal maintenance (referred to as “alimony” or “spousal support” in other states). This primer on property division in divorce provides an overview, but the best way to obtain legal advice about property division issues that pertain directly to your situation is to contact experienced Texas divorce attorney Alex Tyra and to schedule a free consultation.
Distinguishing Community Property from Separate Property
There are two types of states for purposes of property division: (1) equitable property states and (2) community property states. Because Texas is a community property state, we will focus our discussion on community property. Community property includes all assets and debts acquired during marriage that are transferred via inheritance or gift to one spouse. Both spouses have an undivided and equal interest in all community property.
Separate property, which is not subject to division by a Texas court in divorce, includes all property and debts acquired by each spouse prior to marriage or received during the marriage by means of gift, devise, bequest or other form of inheritance. If property is acquired during the marriage, it is presumed to be community property unless clear and convincing evidence is presented that the property is separate property. Separate property is not subject to division during divorce but a substantial disparity between the spouses during divorce may be considered when a court is try to determine a fair and equitable division of community property.
Identification, Characterization and Valuation of Assets and Debts
The initial step in dividing assets and debts in a Texas divorce is identifying all assets and debts and characterizing this property as community or separate. Sometimes property is not exclusively community or separate because these disparate types of assets have been commingled. Commingled property can present the most challenge because it has both a separate and community property component. Common examples include pensions, 401K accounts and real properties that are owned by one spouse during marriage but receive contributions from the income of either spouse during marriage. Income of either spouse during marriage is community property. When community property is used to improve real estate or enhance the value of a 401K through direct investment and appreciation from such contributions, this creates an asset with both a community and separate property component.
The process of valuing property involves preparing a sworn inventory and appraisement, which is akin to a personal financial statement. The value of retirement accounts, investment accounts, bank accounts and similar assets are based on a current statement. Assets like real estate and business interests may require experts to provide a valuation. Because business valuation experts and real estate appraisers can differ greatly in their opinions regarding valuation of an asset, it is important to be careful in selection of experts for valuation purposes. If the judge or jury must make a determination on value, an expert who can provide a clear and effective justification for a valuation can be extremely important.
Factors in Dividing Property in a Texas Divorce
It is important to understand that the court is not required to divide community property equally but rather reach a fair and just division. There are a range of factors that a Texas court will consider when dividing community property, including but not limited to the following:
- Duration of the marriage
- Relative earning capacity of each spouse
- Contributions made to the community estate
- Comparative value of separate property of the spouses
- Age of each party
- Waste of assets committed by either spouse
- Education of each party
- Fault in causing the breakdown of the marriage
- Party with whom the children reside
When both spouses have similar earning capacity and similar expectations regarding duration of employability based on age, the division might be equal but may range to sixty-forty where one spouse has substantially greater earning potential. The division can be even more unequal depending on the specific facts of the case. Texas divorce attorney Alex Tyra offers a free consultation during which he can advise you about property divisions or other divorce issues. We invite you to contact us in our Longview office at 903-753-7499 or visit our website and submit a case contact form.