All divorces involve at least some division of property. The division can range from each party keeping the personal property in their possession to more complicated estates involving the division of multiple houses, parcels of land, businesses, brokerage and retirement accounts, and even assets like Bitcoin or other cryptocurrencies. Regardless, clients frequently ask, “What's going to happen to my property?” and “How do I get all property I'm entitled to?” This article provides an overview of how Texas courts divide property and steps you can take now to help you get the property you deserve.

General Rule – Just and Right Division

In Texas, the Court is required to order a division of the marital property in a manner that the Court deems just and right, having due regard for the rights of each party and any children of the marriage. Let's break that down. The Court, not a jury, determines the manner of division. The guiding legal standard is simply what the Court deems to be “just and right,” having regard for the rights of each party and any children of the marriage.

Texas judges have broad discretion in deciding what is “just and right.” An appellate court will only overturn a court's division if an “abuse of discretion” can be shown. That's a tough standard, and it's quite challenging to show that a Judge “abused their discretion.” As such, most property divisions are upheld on appeal. Therefore, you must retain an attorney who understands the multiple factors that the judge can consider in making a “just and right” division.

Community v. Separate Property

Texas law presumes that all property owned or possessed by the parties at the time of divorce is community. This includes real estate, cars, financial accounts, cash, businesses, furniture, jewelry, retirement accounts, and even the parties' income (salary and bonuses). A common misconception is that if you use your salary or earnings to buy an asset, it is your separate property. It's not. A spouse's earnings are community property, even if the other spouse doesn't work.

Separate property is that which is owned or claimed before marriage or acquired during marriage by gift, devise or descent. In addition, recovery for personal injuries sustained during the marriage is separate property, except recovery for lost earnings or loss of earning capacity. Other than that, all other property owned at the time of divorce is presumed to be community.

Overcoming the Community Presumption

We start with a presumption that everything the spouses own at the time of divorce is community property. The party claiming that an asset is separate has the burden to rebut the community property presumption. Any evidence that property is separate must be “clear and convincing.” This can be a challenging burden to meet.

With unique and clearly identifiable items, such as a watch, a car, or even a piece of land, if you can show you owned the property before marriage, you will probably be able to meet the clear and convincing evidence burden. It gets far more challenging to meet the clear and convincing standard with financial assets, as there is often a commingling of community funds with separate funds. Think about a bank account with $50,000 that you owned before marriage. Over several years, that account will accrue interest that is typically rolled back into the account. Effectively, this commingles the community funds (interest is community property) with the original separate funds. Since one dollar looks exactly like another, unless you can “trace” out all of the community interest added and commingled with the separate funds, that entire account is presumptively community property.

“Tracing” is a method of establishing what is community and what is separate, but it requires clear proof, usually involving obtaining all the bank records and evidence of every transaction showing community funds added to the account. To further complicate things, most accounts show not only money in but also money out. You must account for every dollar that comes in and goes out. Over a twenty-year marriage, this can be very difficult and expensive.

The Court cannot divide a party's separate property. If an asset is proven to be separate property by “clear and convincing evidence,” the Court may not divide it or divest a party of their right to that separate property.

When Will the Court Order an Unequal or “Disproportionate” Property Division?

Most property divisions made by a judge are 50-50. However, the judge may award one spouse more than 50% of the community property if there is a significant disparity in the ability of the parties to earn money in the future or if there has been horrible behavior during the marriage.

The reality is that most judges are not shocked or surprised when they hear that there has been an affair because they are so common in divorce. Further, most cheaters will argue the marriage was already broken, and the affair was simply the result of a marriage that's been over for years.

However, if the behavior is particularly egregious, the Court may make a nominally disproportionate division, but don't assume you'll get all or even most of the property. That is unlikely to happen. Bad behavior may tilt the division to around 55-45, perhaps 60-40, but typically, that's about as far as most judges will go. Judges are much more likely to give a disproportionate share based on financial disparities between the parties.

Factors Affecting a "Just and Right" Division.

While there is no standard percentage assigned to a “just and right” division, most judges start at a 50-50 split. However, the Court can consider multiple factors that may move the needle in favor of one spouse over the other. There is no limit to the factors a court can consider in deciding what constitutes a just and right division. Still, there are certain factors commonly considered by courts in making the determination, including:

• Fault in the breakup of the marriage
• Length of the marriage
• Education levels of the spouses
• Relative employment, earning capacity, and business skills of the spouses
• A disparity in incomes and earnings of the spouses
• The age and physical health of the spouses
• Financial obligations of the spouses
• The size of separate estates and expected inheritances of a spouse
• The nature of the property and whether it benefits one spouse over the other
• Wasting of community assets by a spouse
• Fraud on the community, including hiding or secreting assets
• Credit for any temporary support paid during the divorce
• Unusual needs of adult children
• Tax consequences of the property division
• Whether a spouse committed fraud on the community
• Custody of minor children

Presenting a judge with proof of these factors can be a real challenge, given that most courts are very busy, and you won't have the luxury of unlimited time to present your case. You need to be fully prepared, and, of course, it always helps to have a skilled and experienced lawyer on your side who understands how to present these multiple division factors.

What Are Some Things You Can Do?

In every divorce case, both spouses must file a “Sworn Inventory and Appraisement.” All Texas courts will require that the parties prepare, exchange, and file their sworn inventories before the case proceeds to trial. The inventory must include a sufficient description of each asset, debt, and retirement account you and your spouse own. In addition, each asset and debt must have a proposed value, even if the valuation is an estimate.

Early on in the case (even before a suit is filed, if possible), you should begin putting together your “Inventory and Appraisement.” Preparing an inventory is a time-consuming and daunting task and almost always requires more time and effort than you think. Your inventory must be as accurate and detailed as possible. You must pay particular attention to the values placed on the assets.

As part of the inventory process, you should begin to decide which assets you really want, considering their value, ability to sell the asset if needed, and any tax consequences that may apply. Identify all the property you wish to keep, including financial assets and any personal items you want, such as family heirlooms, artwork, jewelry, and furnishings. You should also decide which properties you do not wish to keep, doing your best to inventory those properties with realistic valuations. Overestimating the value of an asset that your spouse wants (or that you do not want) is dangerous. The other side will invariably argue that you should keep an overvalued asset at the high value you ascribe. Therefore, your valuations must be fair and accurate, backed up by evidence of value such as purchase receipts, appraisals, and even listings of similar assets for sale on websites like eBay and Craigslist.

List any factors you believe your attorney should consider in presenting the proposed division to the Court. You'll want to focus on things like the length of your marriage, differences in education and work experience, any disparity in your earnings or earning ability compared to your spouse, any business opportunities your spouse has, and whether you helped your spouse further their education by working and deferring your own. You should identify any unusual financial responsibilities you may have, such as caring for adult children or other relatives, anticipated inheritances your spouse may receive, your age and any health issues you may have, fault in the breakup of the marriage, and any fraud or wasting of the community assets by your spouse.

What does this have to do with mediation?

In divorce litigation, particularly in cases involving significant marital assets or debts, it is vital for both sides of the dispute to have all information in their possession before sitting down to discuss a possible resolution. People mistakenly believe that hiding information will better position them for success. The opposite is true when it comes time to negotiate. You want the other side to have all information they need to make decisions about the case. The better strategy is to make sure that both sides have all documents and other information that is needed to make intelligent decisions about how to divide the marital estate. When a full exchange of information occurs, there are no "excuses" or impediments to stand in the way of meaningful negotiations. 

Armatys Millard Is Here to Help!

Walter Armatys and John Millard have significant family law experience, both as trial lawyers and as Family Court Judges. This judicial experience gave Walter and John a keen insight into how Judges think, what persuades them, what annoys them, and, importantly, what information Judges need to make an appropriate ruling. Armatys Millard provides mediation and arbitration services for family law disputes pending in Fort Bend, Harris, and surrounding counties. You can count on our extensive family law experience and judicial wisdom to help successfully resolve your case.

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If you need to mediate or arbitrate a divorce, custody dispute, or other family law issue, Armatys Millard, PLLC can help. Check availability and book your session online or call our office at 281-313-6800. We're here to help!