Understanding High-Net-Worth Divorce in Texas

Going through a divorce is hard, especially so for high-net-worth couples. A high-net-worth divorce in Texas involves more than ending a marriage. It often requires the careful division of substantial assets/complicated debts. In many cases, the central dispute is not only who gets what, but what the property is worth and whether it is community or separate property. These cases can also involve forensic accountants, business valuation experts, tax professionals, financial planners, and other experts. With a high-net-worth divorce, a proactive approach is a must. At Thornton Esquire Law Group, PLLC, our Houston divorce lawyer has the expertise needed to handle high-asset divorce cases. 

What Makes a Divorce “High Net Worth” in Texas?

To start, it is important to understand that a high-net-worth divorce is not a separate category of divorce under Texas law. The same divorce process applies whether the marital estate is modest or substantial: 

• A spouse files a petition, the parties exchange financial information, temporary orders may be entered, and the case is resolved by settlement (more common) or trial. 

The difference is that high-net-worth divorce cases usually involve more complex property characterization, valuation, tracing, tax, and enforcement issues. Not only might a Texas couple be dividing a house, a bank account, and retirement accounts, they may also need to deal with businesses, professional practices, commercial real estate, restricted stock, partnership interests, mineral rights, trusts, deferred compensation, complex debt, and much more. 

The Texas Community Property Rules Apply

Texas is a community property state. Under Texas Family Code § 3.002, community property generally includes property, other than separate property, acquired by either spouse during marriage. Under Texas Family Code § 7.001, the court must divide the parties’ estate in a manner that the court deems “just and right,” with due regard for the rights of each party and any children of the marriage. That standard is important. Texas law does not require a strict 50/50 division in every divorce. Still, high-net-worth divorce cases generally start with an equal division analysis.

In a high-net-worth divorce in Texas, the community estate may include wages, bonuses, retirement contributions, business profits, investment gains, real estate acquired during marriage, bank accounts, vehicles, household property, and ownership interests obtained while married. To be clear, property title alone does not control characterization. An account held in one spouse’s name may still be community property if it was funded with community income. Likewise, a company owned by one spouse may have community value if it was formed or expanded during the marriage.

Separate Property Can Be a Major Issue in a High-Net-Worth Divorce Case

Separate property can become one of the central disputes in a high-net-worth Texas divorce. Under Texas law, separate property generally includes property owned before marriage, property acquired during marriage by gift, inheritance that is kept separate, and, in some cases, personal injury settlements/verdicts. Still, property possessed by either spouse during divorce is presumed to be community property unless the spouse claiming separate property proves otherwise. 

For example, imagine a spouse in Houston entering the marriage owning an interest in a family business, several investment accounts, and a piece of commercial real estate. During the marriage, business income is deposited into joint accounts, community funds are used to pay debt on the real estate, and investment accounts are actively managed with both separate and community deposits. Years later, during a divorce, the spouse claims that the business, real estate, and investment accounts are separate property. The claim may be valid in whole or in part, but it must be proven. 

Business Interests, Professional Practices, and Complex Assets Must Be Valued Carefully

Business valuation is often one of the most technical parts of a high-net-worth divorce. A spouse may own a medical practice, dental practice, law firm interest, oil and gas services company, real estate development entity, restaurant group, construction company, consulting firm, or closely held family business. Experts are often necessary. A forensic accountant, business valuation expert, real estate appraiser, compensation expert, or tax professional may be retained to evaluate the marital estate. Business valuation may involve an income approach, market approach, asset-based approach, or a combination of methods.

Tax Consequences Can Shape the Final Divorce Settlement

Taxes can significantly affect the real value of a divorce settlement. Two assets may have the same stated value but very different after-tax consequences. A brokerage account with embedded capital gains is not the same as cash. A traditional retirement account is not the same as a Roth account. Commercial real estate with depreciation recapture exposure is not the same as a debt-free residence. Business interests may carry pass-through income, phantom income, built-in gains, or future tax liabilities. High net worth divorce settlements should be evaluated on an after-tax basis whenever possible. An experienced Houston high-net-worth divorce attorney can help. 

Why Trust Thornton Esquire Law Group for a High-Net-Worth Divorce in Southeast Texas

High-net-worth divorce can be complicated. Given the unique, often challenging financial issues that can arise, it is imperative that you have a reliable advocate on your side. At Thornton Esquire Law Group, PLLC, we are a Houston-based law firm that handles the full range of family law cases in Southeast Texas. With extensive experience handling high-net-worth divorces, our team is ready to protect your rights and your interests. An initial consultation with our Houston high-net-worth divorce lawyer is completely confidential and carries no additional obligations. 

Contact Our Houston High-Net-Worth Divorce Attorney Today

At Thornton Esquire Law Group, PLLC, our Houston high-net-worth divorce attorney has the experience you can rely on in complex cases. If you have any questions about the process, please call us at (888) 378-1784 or contact us online for a strictly confidential consultation. From our law office in Houston, we handle high-net-worth divorce cases throughout the region, including in Harris County, Galveston County, Brazoria County, Fort Bend County, and Montgomery County.