A party’s separate property consists of:
- The property owned or claimed by the party before marriage;
- The property acquired by the party during marriage, by gift, devise, or descent;
- The recovery for personal injuries sustained by the party during marriage, except any recovery for loss of earning capacity during the marriage.
The significance of separate property is that its owner cannot be divested of it in the divorce settlement; it is set aside for its proven owner. The burden is upon the party to prove that property is his or her separate property by clear and convincing evidence.
Community property is all property other than separate property acquired by either spouse during marriage. Property possessed by either spouse during the dissolution of the marriage is presumed to be community property, unless either party can prove that it is their separate property by clear and convincing evidence.
Once the court determines that property is community property, then the court must divide that property. In dividing community property, the court is obligated to order a division of the estate of the parties in a manner the court deems “just and right”, having due regard for the rights of each party and any children of the marriage. In dividing the community estate of the parties, the court typically takes into account any number of the following factors:
- Fault in the breakup of the marriage
- Health of the parties
- Education of the parties
- The present earnings of the parties
- The future earning capacity of the parties
- The party raising the minor children of the marriage
- The specific nature of the property
- Any separate property that either party may have
- Any inheritance that a party is likely to receive
- Tax issues in connection with property
- Any fraud that one party has committed against the community or the other party
- The debts of the parties
As a practical matter, if the court has two people before it with the same educational background, earning the same income, and having the same opportunities in the future, and no children, the court will divide the estate of the parties 50/50. As more facts favor one party, then the court has a tendency to award the other party a greater percentage of the community property. For example, if the wife is clearly at fault in causing the marriage to break up, is young, and in good health, is earning substantial income, has an MBA, and expects to inherit a lot of money from her family, and the husband has only a high school diploma, suffers from deteriorating health, has a low paying job, and is taking care of the party’s three children, then the husband could expect to receive a substantially greater portion of the community property than the wife. Property awards of up to 90% have, in very unusual circumstances, been upheld by the appellate courts in Texas.
Many clients want to approach a divorce settlement insisting that they get 60%, 70%, or 75% of the community property, because they believe that the other party was at fault in the breakup of the marriage. Such an approach can make it very difficult to settle a case without trial. Usually the other party does not believe that he or she was at fault in the breakup of the marriage, or even if they were, they believe they were justified in engaging in the conduct because of the complaining party’s approach to the marriage. Also, the courts frequently do not place the same degree of emphasis as the clients do upon any particular issue. For example, while one party may clearly be at fault in the breakup of the marriage, the court will be weighing that issue against the issues of present earning ability, future earning ability, educational background, etc. Also, the courts frequently have a different perception of the value of community property, and that can substantially effect the court’s division of it. For example, while a party believes that the equity in the house is $30,000.00 and is demanding a 70% division from the court (or $21,000.00), the court may very well find that the equity in the house is only $10,000.00, and award the party only 60% of that equity ($6,000.00).
Of course, the vast majority of cases do not go to trial. While evaluating any settlement, the parties should take into account all of the factors that the court would take into account when settling a case. Some factors have a significant bearing on the settlement. For example, if one party particularly wants the house, they should probably be willing to accept a lower percentage of the community estate in a settlement in order to make certain they get the house. There is absolutely no guarantee that the court will award a party the house. The court may very well decide that it would be better to sell the house, or award the house to the other party.
Since a judge can take into account so many different factors in dividing the community estate of the parties, the court has great discretion in how it divides the estate. And very rarely will the appellate courts reverse the decision of a trial judge on the basis that the trial judge was guilty of “abusive discretion”. The fact that there is very little possibility that a party can appeal a trial court’s division of the estate is an important factor to take into account in making a decision regarding whether or not to settle the case.
John K. Grubb practices family law in Houston. He has a BBA, MBA, and a JD Degree. John K. Grubb focuses a significant part of his family law practice on helping couples create premarital and prenuptial agreements in Texas.