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Asset and Debt Division in Texas: Things You Need To Know

Division of property and debts in divorce cases is one of the most contentious issues. This is because it directly impacts how much money each party receives and whether they will be able to maintain a stable financial future. In fact, according to a recent survey conducted by the American Association of Matrimonial Lawyers, 70% of respondents reported that asset division disputes were among the most difficult issues in their practice.

The problem is that determining what constitutes marital property is complicated. Because there are no hard and fast rules, judges must rely heavily on precedent and case law to make decisions about what belongs to whom. As such, courts tend to favor equitable distribution over strict legal ownership.

In addition to the complexity involved in deciding what belongs to whom, there are several other factors that complicate matters even further. For example, while some states require spouses to sign prenuptial agreements prior to marriage, others do not. Additionally, some couples choose to live together without marrying, and still, others decide to marry later in life. These situations mean that the laws governing property division change depending upon where you live and when you got married.

When making determinations about what is marital property, courts typically look at five types of items:

  1. Cash – cash held in bank accounts, credit cards, etc., is considered separate property unless it was acquired during the course of the marriage.
  2. Assets purchased with joint funds - assets bought with both parties' names on the account are generally considered jointly owned. However, assets bought with just one spouse's name on the account are usually deemed to belong solely to that person.
  3. Separate property - assets purchased with either spouse's name alone are considered separate property.
How Do Texas Courts Divide Assets in a Divorce?

When a couple gets married in Texas, the state presumes that all the properties they acquire together don't belong specifically to either party. Instead, all property that couples acquire during their marriage becomes part of the marital community estate. This includes everything from money earned while working, to real estate, to cars and even pets.

However, when the marital community ends due to divorce, all community assets are subject to a "just and right" division between the spouses. In other words, the court must divide the community estate according to what it deems fair.

Texas courts have held that a "just and right" division of community assets isn't necessarily an equal, fifty/fifty split of the entire community estate. Instead, courts will look at certain factors when dividing community assets. These include:

  • The nature of the property—for example, whether it's liquid like cash or fixed like a house.
  • The length of the marriage—the longer the relationship, the less likely it is that the court will award each spouse exactly half of the community estate. And the shorter the relationship, the more likely it is that the judge will give each spouse an equal amount.
  • Whether there was fraud or overreaching. If one spouse took advantage of another, the court might decide to make up for the harm done by awarding the wronged spouse a larger portion of the estate.
  • Whether the spouse seeking the unequal distribution had contributed more to the family's financial well-being. For instance, if one spouse worked outside the home while the other stayed at home raising children, the court might view that as a sign that he or she deserves a bigger piece of the pie.
Community vs. Separate Property in Texas

The law governing what constitutes marital property is complicated. In general, anything you acquire during the course of the marriage is considered community property. If you contribute money or labor to the acquisition of something, it becomes part of the community estate and is subject to distribution upon divorce.

Anything you own prior to the marriage, on the other hand, is considered separate property. You don't have to pay alimony for things you bought before the relationship began, even if you spent money or worked hard to earn those items.

If you want to know whether you have enough community property to cover potential future liabilities, consult a lawyer. They can help you determine how much you might owe in taxes, child support, and alimony based on the values of your assets.

Division of Community Liabilities

The division of community property is governed by section 3.63 of the Family Code. This provision states that "the court shall order a just and right division of the parties' community property." Section 3.63(a) further provides that "the court shall presume that each spouse owns 50 percent of the community property."

Section 4.01 defines what constitutes community property. Under this definition, "community property consists of the property, other than separate property, acquired by either spouse during marriage." Property owned prior to marriage is considered separate property. Separate property includes real and personal property owned by one spouse before marriage. Real property owned by both spouses before marriage is presumed to be separate property.

As mentioned above, section 3.63(b) allows the trial court to deviate from the presumption that half of the community property belongs to each spouse. In addition, the statute specifically permits the trial court to consider whether the distribution of the property would be unjust or inequitable under certain circumstances. Among those situations where the court may deviate from the 50/50 split are the following:

  1. If the community estate is exhausted by payments of debts for the benefit of the community;
  2. If one spouse wastes or mismanages community property;
  3. If one spouse commits fraud on the community;
  4. If one spouse makes excessive gifts to the other spouse;
Contact an Attorney Today

If you are facing a contested divorce or simply want to know what you stand to gain or lose under Texas law, please contact an attorney today in Harris County, Galveston County, Fort Bend County, Montgomery County, Brazoria County, Houston, Sugar Land, Missouri City, and Stafford, Texas at Thornton Esquire Law Group, PLLC. Our attorney can provide you with information regarding how much you might expect to receive in the way of child support, alimony, retirement benefits, and other forms of compensation. Contact us today at Thorntonesquirelawgroup for a free consultation.

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