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How Do Courts Divide Property in Divorce?

After a long period of time married, it can be extremely difficult to untangle the lives of the spouses involved, and when it comes to divorce, conflict often ensues. Both parties seek what they believe to be in their best interests, but without a skilled attorney and mediation, this often ends up in a shouting match.

One area that garners a lot of conflict and emotion is the division of property and debts. In community property states like Texas, when it comes to dividing property, you are always better off seeking the legal representation of a skilled divorce attorney, one with experience in marital asset division.

In community property states like Texas, separate property belongs to the spouse who it belonged to before the marriage. Community property, however, which is the property and debts obtained during the marriage, is subject to equitable property division.

Here at Skillern Firm, our team of divorce attorneys and family law lawyers have extensive experience in all aspects of the divorce process. We can help you come to agreements on how to divide your property in a fair and reasonable way, preventing the need for court decisions that may not be in either spouse’s favor.

However, in the eventuality that you and your spouse simply cannot come to an amicable agreement, even with mediation and negotiation, we will fight for you in court and will help you put forward the best case possible.

What is Equitable Distribution?

Texas is an equitable property division state, and this means that personal property owned and acquired during the marriage that is classed as community property, is subject to equitable division.

Equitable means fair division. It does not mean equal division, and this is important to understand. In equitable property division states, property does not need to be split equally 50/50 like in some states. The Judge has the final say and this means if they believe one party deserves a larger split of the marital property, they have the power to do so.

This makes it incredibly important to seek legal representation from a skilled attorney to present your case. The skill and reputation of your attorney could be the difference between a split that seems fair and reasonable, and one that feels unfair.

In order for any decisions to be made, the property owned by both spouses needs to be valued, and sorted into the two types of marital property.

Types of Property Assessed in a Divorce

There are generally two types of property assessed in a divorce:

Marital Property

If either you, your spouse or both of you have obtained assets during the marriage, these assets will be classified as marital property. There are several exceptions, such as inheritance, gifts and compensation payouts. Debt also falls under marital property unless you can put forward a compelling case to the courts that the debt was your partner and had nothing to do with you.

All marital property is subject to equitable distribution in the divorce proceedings.

Separate Property

When dividing property for the divorce, separate property is the property that belongs solely to one individual. Each spouse’s separate property includes the assets that they obtained prior to the marriage and can also include inheritance, gifts or compensation payouts.

Equitable Distribution Is Not Equal

When going through a divorce in the state of Texas, it is worth remembering that equitable division is not the same as dividing property equally. While a 50/50 may be equitable, equitable division places much more power in the hands of the Judge. This means that the case you present may affect their judgment when it comes to making a decision.

In order to make this decision, the courts will investigate the financial circumstances of each party. They will take into account each couple’s separate property assets, earning potential, and the nature of the couple’s child custody agreement.

For example, if the marital home falls under separate property and belongs to one party, and the other spouse gave up their career to maintain the family home and look after the children, the Judge may award a larger percentage of the community property bank account. If the couple has $40,000 in savings, the Judge may decide it is equitable to award $30,000 of those funds to the spouse who gave up their career.

This is one of the most important reasons to seek an experienced local attorney. They will likely have experience dealing with the Judges in their local area and will have an in-depth understanding of equitable distribution and community property rules. This experience is invaluable, as it gives them an edge in preparing a compelling case on your behalf, since they know how the Judge may act.

Who Gets the Marital Residence?

When it comes to the property agreements regarding the marital home, there is often a lot of conflict and arguments over what happens. It is rare for couples to agree on how to allocate the home. If they cannot come to a decision, it will be down to the Judge to make the decision on their behalf.

There are two common routes that this can take:

The House is Sold, and Proceeds are Divided Between You and Your Spouse

The first way that it may go is that the parties agree that the house be sold and the proceeds split between the spouses in an amount agreeable. Again, this does not have to be a 50/50 split.

If the proceeds amount cannot be agreed upon, the Judge may decide the split and may award more of the funds to the spouse who spent the most on mortgage payments and renovations.

Alternatively, if there are children, the Judge may award more of the funds to the parent who is going to be the primary carer of any children from the marriage. This will give them an easier time when it comes to finding new accommodation for the child and the parent to live.

Legally Transferred to One Spouse

The second common option is that the couple agrees that the marital home should be awarded and legally transferred to one spouse. This often happens when a divorcing couple has one spouse who is going to be the custodial parent going forward. This prevents as much displacement as possible, which is usually in the best interests of the children.

To combat this, the Judge may award the house to one spouse and a larger proportion of the assets in bank accounts and savings plans to the other spouse to balance the scales.

How Are Marital Debts Allocated?

Shared Debt

As a community property state, debt that is accrued during a marriage is usually shared and classed as community property. Shared debt can include credit card debt and loans, even if the loan is only in one person’s name. If the money was used by both spouses or spent on renovations on the house, it is usually seen as shared by the courts.

The Judge may decide that debts should be split down the middle, and both parties are responsible for their half. They may also decide one spouse deserves to pay more of the debt.

Ultimately, it is down to the Judge, but they may take into account the amount of the debt, the financial ability to pay the debt off for each spouse, and the reason the debt was incurred.

Separate Debt

Any debt acquired by an individual before they got married will remain separate property, and they will be responsible for paying that debt off. College debt, student loans, credit card bills, and anything from before the marriage is separate from the marriage.

Debt that is acquired prior to the marriage typically remains separate from the equitable distribution process. For example, if one spouse went to college prior to getting married and owes student loans, they would continue to maintain sole ownership over those loans after the divorce.

What Happens To Businesses?

Dividing business assets and businesses is extremely complicated, and you will need the help of a skilled attorney and, potentially, a financial expert.

Here are the ways business assets may be split in Texas:

Selling the Business

The first method may be that the Judge orders you to sell the business and split the proceeds, just like with the marital home. To do this, you will need to agree on the value of the business with your spouse and find a buyer.

This is often the last thing the spouses want as a result may be a lower payout than the business is worth. Selling a newer business may prevent it from growing into a larger business worth more money in the future. In these cases both parties may need to start their businesses from fresh.

Co-Owning the Business

Co-owning the business is a sensible idea for spouses who are more amicable and less prone to conflicts and arguments. If the Judge rules this, you will have to work with each other as if you were colleagues and that means making financial and business decisions together like partners. For some couples, this simply is not an option, and these couples may decide that one partner is going to deal with the daily running of the business and the other will take a pre-discussed cut of any profits without being involved.

For those that do not want their businesses to end, this may be the best way forward.

Buying Out the Business

The third option is for one spouse to buy the other spouse out of the business. When this happens, one spouse signs over ownership to the other for a lump sum or an agreement of payments. This agreement is known as a structured buyout and will require an attorney as there will need to be signed contracts that bind both parties.

If one party has the cash to buy the other out, this is a simpler process.

What If My Spouse Tries to Hide Assets?

Often, we deal with cases where one spouse tries to hide some of their assets before the divorce proceedings so that they are not subject to the calculations. By hiding the asset they hope that they get to keep the asset as well as the other assets awarded to them.

To do this, they may gift the asset to another family member or friend, or they may change the name on the title.

In Texas, it is a legal requirement that you are fully honest when it comes to disclosing your assets at the start of the divorce proceedings. If it is found out there are hidden assets, there may be legal consequences and the Judge will not look fondly upon the spouse caught out.

If you have reason to believe that your spouse is hiding assets, the best thing to do is to tell your attorney. They will be able to investigate, or seek a financial expert who can help them locate and value the asset so it can be included in the calculations. They will also ensure that the Judge is made aware of what happened.

Dividing Retirement Accounts

Often, one of the highest-value assets in a marriage are the savings and retirement accounts you have built up over your years of marriage. Retirement accounts are particularly tricky to deal with as they may be worth a lot more as they mature in the future. An attorney will have contacts with local financial experts who can help you assuage the true value of the retirement accounts. This means you do not lose out.

Pensions and 401(k)

Often, one spouse may have a 401(k) or other sponsored retirement plan through their work. In these situations, their spouse may be legally entitled to a portion of these savings unless there is a clear prenup that states differently.

If you are attempting to pursue a portion of your spouse’s retirement or pension plan, you are going to need to speak to an attorney, as there are some complicated forms that you need to fill in. This will allow you to seek a portion of retirement funds.

What Happens to the Engagement Ring?

Engagement rings are not generally considered in marital assets. As a gift, they belong to the individual who was gifted the ring. This means they do not fall under equitable division.

What To Look For in a Divorce Lawyer

When it comes to filing for divorce, it is important that you obtain representation from an attorney who will fight for your rights aggressively. You should always look for an attorney who is experienced and has numerous wins under their belt. This will allow them to help you through your divorce as smoothly as possible.

For many of our clients, there has never been the need for an attorney before and this may make the research and decision on who to choose, a difficult one.

Here is what you should look for:

Focused on Mediation

When it comes to divorce proceedings and family law, the main goal should be to come to agreements with the other party amicably, without sacrificing what you deserve. This will allow you to avoid the additional court costs. It will also mean that the Judge does not have to make decisions on your behalf. There is no guarantee of which way they will lean when making a decision, and you may find their decisions are not favorable to either party.

Avoiding conflict and working amicably also avoids conflict. This protects any relationship that may still survive. Being amicable with your ex-spouse becomes even more important if you have children together. Remember, the child’s best interests are the most important. If you and your spouse can be amicable, it will be in their best interests. Studies have shown that children of divorced parents develop better if they have access to both parents and conflict is minimized.

Here at Skillern Firm, we prioritize mediation above all else. This saves you time, money and protects your mental health as much as possible.

Litigation

While mediation is crucial if you want to come to an agreement amicably with your spouse to avoid court costs and the lengthy process, sometimes it simply does not work out. Sometimes spouses are so emotional that they cannot come to amicable agreements. When this happens, you need to ensure your attorney is prepared and capable of fighting your case for you in the courtroom.

Compassionate

You may be dealing with your attorney for several years and this means it is important they are compassionate to your needs and you feel comfortable in their presence. You may have to talk to them about personal matters and if you cannot, you may hamper their ability to fight on your behalf.

Qualified

Here at Skillern Firm, our family law attorneys are trained to the highest standards, coming from reputable law schools. Our Senior Associate Caitlin B. Thorpe, senior counsel, Robin Klein, Partner H. John Schmude, and our managing partner, Matthew Skillern, are all Board Certified in Family Law by the Texas Board of Legal Specialization, which is a recognition given to only 1% of family lawyers.