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What is Asset Division?
In Texas, property division, often referred to as asset division, is the process of allocating property and assets between spouses during a divorce. Texas follows community property laws when it comes to property division, which means that, in general, most property and assets acquired during the marriage are considered community property and are subject to equal division between the spouses. However, there are exceptions and complexities in this process, and a fair division doesn't necessarily mean a 50/50 split of every asset.
Common types of assets involved in property division in Texas include:
- Real Estate: This includes the family home, vacation properties, rental properties, and any other real estate owned by the couple.
- Bank Accounts: Checking and savings accounts, certificates of deposit, and other financial accounts fall into this category.
- Retirement Accounts: This includes 401(k) plans, IRAs, pensions, and any other retirement savings accounts accrued during the marriage.
- Investments: Stocks, bonds, mutual funds, and other investment assets are subject to division.
- Personal Property: Items such as furniture, electronics, jewelry, and artwork are typically divided.
- Vehicles: Cars, motorcycles, boats, and other vehicles are considered assets and are divided between spouses.
- Business Interests: If one or both spouses own a business, the valuation and division of the business can be a complex aspect of property division.
- Debts: Debts acquired during the marriage, such as mortgages, credit card balances, and loans, are also divided between the spouses.
- Household Items: Everyday items like appliances, kitchenware, and furniture are usually divided between the spouses.
- Personal Items: Personal items like clothing, collectibles, and sentimental possessions may also be part of the division.
- Artwork and Collectibles: Valuable art, antiques, and collectibles can be subject to division.
- Intellectual Property: Intellectual property rights, such as copyrights, patents, and trademarks, may be divisible assets.
- Professional Practices: If one spouse has a professional practice, such as a medical or legal practice, the value and division of that practice may need to be determined.
- Mineral Rights and Royalties: If the couple owns mineral rights or receives royalties from oil, gas, or other natural resources, these can be part of the division.
- Retained Earnings: In community property states like Texas, income earned during the marriage, even if not yet received, is often subject to division.
Separate vs. Community Property
How does Texas divide property? It is a community property state that uses equitable distribution rules. This means that shared property is divided based on what is fair, not on what is exactly even.
The two types of property to consider in asset division are:
- Separate: If you own a piece of property on your own, such as a gift or inheritance, then it should be separate property. The same is true for any property that you owned before you got married. Separate property is not meant to be divided.
- Community: If you own a piece of property with your spouse, or you bought something while you were married, then it will likely be considered community property. This type of property is divided equitably.
What is Property Evaluation?
You probably know what property is community property in your marriage, but the court doesn’t. Your spouse might not have a clear idea of it, either, which can cause a lot of problems during asset division. To figure out what property should be considered community or owned by both spouses, a Texas family law court will evaluate several factors.
The factors considered by a family law judge will include:
- Reason for the divorce or separation
- Income earned by each spouse
- Child custody orders
- Education of each spouse
- Size of the family estate
- Overall health of each spouse
At Diggs & Sadler, we have experience in divorces involving high-value assets and complex estates.
What is Separate Property?
The separate property that you own could be miscategorized as community property and then given to your spouse or divided. You understandably won’t want that happening. Not only would that technically be wrong to do, but it might leave you feeling cheated when the divorce ends, which will make rebuilding a relationship with your spouse more difficult.
To prove that separate property should remain separate, we can consider:
- Proof of purchase like receipts
- Statements that show you received an item as a gift
- Inheritance information
- Financial or bank records
How Prenuptial Agreements Impact Property Division in Texas
Prenuptial agreements, often referred to as prenups, can have a significant impact on asset division in Texas divorces. A prenuptial agreement is a legally binding contract that is entered into by a couple before they get married. It outlines how their assets and debts will be handled in the event of a divorce or the death of one of the spouses.
These agreements can address various financial matters, which can affect the asset division process in Texas in the following ways:
- Asset and Debt Protection: A primary purpose of a prenuptial agreement is to protect the separate property of each spouse. This can include assets they owned before the marriage, as well as any property or assets they want to keep separate during the marriage. Without a prenup, these assets could potentially be subject to community property laws in Texas, but a well-drafted prenuptial agreement can help safeguard them.
- Clarification of Property Ownership: Prenups can clarify the ownership of specific assets and debts. Couples can specify which assets are considered separate property and which are community property, reducing ambiguity in the event of a divorce.
- Division of Marital Property: While prenups often address separate property, they can also outline how marital or community property should be divided. Couples can specify a division method that differs from the default 50/50 split dictated by Texas community property laws.
- Business Interests: If one or both spouses own a business, a prenuptial agreement can address the valuation and division of the business in the event of a divorce, helping to protect the business interests of one or both spouses.
- Inheritance and Estate Planning: Prenups can outline how assets will be distributed in the event of the death of a spouse. This can be important for estate planning and protecting the interests of children from previous marriages.
- Debt Responsibility: Prenuptial agreements can specify which spouse is responsible for particular debts incurred during the marriage. This can be especially important in cases where one spouse has significant student loan or credit card debt, for example.
- Financial Transparency: Drafting a prenup often requires full financial disclosure from both parties. This can lead to open and honest discussions about finances, which can be beneficial for the marriage as well as future asset division.
However, it's crucial to ensure that prenuptial agreements in Texas meet certain legal requirements to be enforceable. These requirements may include full financial disclosure, the absence of coercion or duress when signing, and compliance with state laws.
Other FAQs About Property Division in Austin
Can we decide how to divide our property ourselves?
Yes, spouses can negotiate their own property division through a settlement agreement. If both parties agree, they can submit their plan to the court for approval. As long as the agreement is fair and doesn't disadvantage one party significantly, the court usually approves it. If spouses can't agree, the court will make the division decision for them.
What happens to retirement accounts in property division?
Retirement accounts, including 401(k)s, pensions, and IRAs, are subject to division if they were earned during the marriage. Texas courts may issue a Qualified Domestic Relations Order (QDRO) to divide these accounts. Contributions made before marriage typically remain separate property, but contributions made during the marriage will likely be split according to the community property rules.
How are debts divided in a divorce?
Debts are divided similarly to assets. Community debts, such as joint credit card balances or loans incurred during the marriage, are divided between the spouses. However, debts incurred by one spouse before the marriage or for personal purposes may be considered separate and remain the responsibility of that spouse. The court aims for an equitable distribution of both assets and liabilities.
Does fault affect property division?
While Texas is a no-fault divorce state, meaning neither spouse has to prove wrongdoing to get a divorce, fault can still play a role in property division. If one spouse committed adultery, was abusive, or misused marital funds, the court may award a larger share of the community property to the other spouse as compensation.
Can I keep the house after the divorce?
If you and your spouse own a home, who gets to keep it depends on several factors, such as whether there are children involved and whether one spouse can afford to buy out the other’s interest in the property. In some cases, the court may order the sale of the home and divide the proceeds. If one spouse is awarded the house, they may need to refinance the mortgage to remove the other spouse’s liability.
What happens if one spouse hides assets?
If a spouse is caught hiding assets during a divorce, it can have serious consequences. The court may penalize the dishonest spouse by awarding a larger portion of the community property to the other spouse. Additionally, there can be legal consequences, such as contempt of court or perjury charges. It's important for both spouses to fully disclose all assets and debts during the divorce process.
Call Our Asset Division Lawyers Today
Our Austin asset division attorneys of Diggs & Sadler are standing by to help you decide the best way to split your assets during a divorce. We will work diligently to make sure that you hold onto your separate property while also getting a fair share of community property. When we handle a case, we act as if we are representing ourselves.
For more information, fill out an online contact form now. We look forward to helping you.
