At the time of divorce, the court is required to divide the community property of the parties. Separate property of a party may not be awarded to another party. Many clients share a common misconception that property is divided at the time of divorce on a 50/50 basis. However, Texas law directs the court to make a “just and right” division of the community estate of the parties. This statute has been interpreted by the courts to mean that the court can consider certain factors in deciding how to divide the property, such as:
- fault in the breakup of the marriage;
- benefits the innocent spouse may have derived from the continuation of the marriage;
- disparity of earning power of the spouses and their ability to support themselves;
- health of the spouses;
- the spouse to whom conservatorship of the children is granted;
- needs of the children of the marriage;
- education and future employability of the spouses;
- community indebtedness and liabilities;
- tax consequences of the division of property;
- ages of the spouses;
- need for future support;
- nature of the property involved in the division;
- wasting of community assets by one or both of the spouses;
- credit for temporary support paid by a spouse;
- community funds used to purchase out-of-state property;
- gifts to or by a spouse during the marriage;
- increase in value of separate property through community efforts by time, talent, labor, and effort;
- excessive community-property gifts to the parties’ children;
- expected inheritance of a spouse;
- attorney’s fees to be paid;
- creation of community property through the use of a spouse’s separate estate;
- the size and nature of the separate estates of the spouses;
- and creation of community property by the efforts or lack thereof of the spouses.
The consideration given to these factors may vary significantly by court and county throughout the state, and is greatly affected by the strength of evidence that supports each factor; however, these factors allow the court to give more or less property to a spouse. It is important to discuss the specific facts of your case with your attorney.
The court will divide the net community estate, which consists of the community assets less all community debts. In almost all instances, if an asset has a debt associated with it (e.g., a car), the person who is awarded the asset also gets the debt. Additionally, courts do not divide credit-card balances between parties. A court is not required to give each party a portion of each asset and debt. For example, if the court decides to give each party 50% of the estate and the estate consists of a house worth $100,000.00, a retirement account worth $50,000.00, a brokerage account worth $75,000.00, a car worth $7,000.00 and a car worth $10,000.00, the court could divide the estate as follows:
Net Asset Value
Car #1: $7,000
Car #2: $10,000
This division gives each party 50% of the net estate, even though each asset is not divided equally. The court also has the authority to order that an asset be sold, or that a lien be placed on property, such as the residence, to be paid when the house is sold, or on a certain date. Because a court does not have the authority to award separate property, there may be cases in which the court needs to decide whether or not property is separate or community property.
Separate property is defined as property that is either
- owned or acquired by a spouse before marriage or
- acquired by a spouse during marriage by either (a) gift or (b) inheritance.
All other property is community property. A party may have had separate property on the date of marriage that no longer exists at the time of divorce, but has mutated into another asset. For instance, if one party owned Coca Cola stock on the date of the marriage, but it was sold and used to purchase Pepsi stock, then the Pepsi stock may be separate property.
Likewise, if one party owned a residence prior to marriage, sold it after marriage, then used the proceeds to purchase a subsequent residence, that residence may be separate property. If not, there may still be a claim for reimbursement, i.e., a claim that the community estate owes the separate estate some money. Any time one estate (community or separate) puts money into an asset of another estate or pays debts of another estate (e.g., student loans incurred before marriage), there may be a claim for reimbursement that should be discussed with your attorney. A party’s ability to prevail on a separate property claim or reimbursement claim is generally contingent on the accuracy of records — such as bank accounts, real estate documents, brokerage records, etc.
Jody L. Johnson is a partner in the firm of Allison & Johnson in Plano, Texas.