Dividing Assets in a Divorce

In many of our divorce cases, the most challenging issue of couples with children is, indeed, the children. Specifically, who gets custody or is it shared, and, if so, how? For noncustodial parents, the issues of visitation and child support can be contentious. However, for childless couples, and for some with children, the most challenging issue can be the division of assets and debts. Here are some things to be aware of and remember to insure you get what you are entitled to.

Texas is one of only nine (9) community property states, in which community property is divided equally. The other 41 states and the District or Colombia divide community property equitably. Division of community property may take place by item, by splitting all items but, in our experience, typically by value. Occasionally, assets such as the home, might be sold, and the proceeds divided equally.

In some jurisdictions, such as California, a 50/50 division of community property is strictly mandated by statute. In other jurisdictions, including Texas, a divorce court may decree an equitable distribution of community property, which may result in an unequal division of that property.

Not all property the couple owns is considered marital property. Anything that is not considered marital property is not divided equally in community property states. Marital property excludes:

• Anything acquired before the marriage or after the date of separation
• Cash received by one of the spouses as a gift or inheritance as long as it is deposited in a separate bank account in one spouse’s name only
• Property received by one of the spouses as a gift or inheritance as long as the property is in one spouse’s name only and not mixed with other marital assets.

The significance of separate property is that a Texas court cannot divest a spouse of their separate property. The burden is upon the spouse claiming separate property to prove that property is his or her separate property by clear and convincing evidence.

In dividing community property, the court typically takes into account a host of the factors, including, but not limited to:

• Adultery
• The present and future earning capacities of the parties
• The health and education of the parties
• The party raising the minor children of the marriage
• Any separate property that a spouse may have
• Any inheritance that a spouse is likely to receive
• The debts of the parties

In our experience, the first two tend to be the most influential in unequal divisions of community property.

Because of the emotions typically associated with divorce, often clients believe they are entitled to more than the 50% assumed in an equal community property division. While the emotions are understandable, clients who insist on this approach often end up unable to reach an agreement with their spouse, which results in a trial, which results in significantly higher legal fees.

While we are speaking of legal fees, here is a way to significantly reduce your legal costs in a divorce. For many couples, particularly childless couples, splitting up possessions is the key issue in reaching an agreement. Make a list of all the items that you own jointly and agree on a value. Then decide who logically gets what property, keeping values roughly equivalent. The most important thing to do is to be open and honest (do not hide assets: it will come out and damage the hider) in setting out everything of value you have come to own during your marriage.