During a divorce, you’re dividing everything you’ve gathered together during your marriage, including emotions and your lives. While you can rely on friends and family to support you with those concerns, you should turn to a qualified legal team to manage the details of separating your home and other property.
The divorce attorneys at Terry and Roberts understand that the division of assets to be divided is often the greatest point of contention in a Texas divorce. Even though the process should be straightforward, applying the law to your specific situation brings about numerous complexities. Let’s examine some common misconceptions about Texas community property laws.
Misconception #1: Everything Is Community Property
While Texas is one of nine states in the U.S. that uses the law of community property to divide marital assets in a divorce, not everything is considered community property. The law recognizes that assets that are acquired during the marriage are part of the “community,” and they are distributed in a manner the court deems “fair and equitable.” Community property includes both assets and debts that are incurred during the marriage.
Community property or marital property can include items such as homes, investment properties, cars, boats, furniture, and even artwork.
If you or your spouse acquired an asset during the marriage, it’s likely considered a community asset, and you must provide clear and convincing evidence to have it deemed separate.
This can be complicated, since even if one spouse alone acquires property during the marriage, it belongs to the community. Unless the property was received as a gift or bequest, there is no such thing as “what’s mine is mine”. Practically every asset is part of the community.
Misconception #2: My Retirement Accounts and Insurance Policies Are Separate Property
Yes, even your retirement account can be considered community property in Texas during a divorce. In addition, any other retirement accounts, investments, business assets, and pensions are considered community assets. Many spouses are surprised to learn the full extent of what will be divided in a fair and equitable manner. However, community property does not encompass all assets, and some items can be considered separate property.
In addition, your insurance policies may be considered community property. For example, for a life insurance policy, you will need to change your beneficiary from your ex after the divorce is final, so a new beneficiary receives the payment when you pass away. However, if the policy has a cash value, you could decide to divide it between you as part of the marriage’s community property.
If you owned the policy before the marriage or you paid the premiums exclusively from an account your spouse had no access to, you may be able to claim it as separate property. Doing so may be complicated unless you work with a skilled divorce lawyer who can help you provide a clear history showing when you initiated the policy and how you paid for it.
Misconception #3: Everything Is Split 50/50 in a Texas Divorce
While most people assume their community assets will be split evenly, that isn’t always the case. Under Texas law, things must be divided in a “fair and equitable manner,” which doesn’t necessarily mean an exact 50/50 split. The court considers many factors, such as:
- The age and life expectancy of each spouse
- The duration of the marriage
- Each spouse’s contributions to the marriage
- Who will have physical conservatorship of any minor or dependent children
- Who retains possession of the family home
- Any marital agreements (e.g., prenups)
- Each spouse’s earning potential and support needs
- Each spouse’s health and physical condition
- Fault in the dissolution of the marriage
- Tax implications of property division
In many instances, one spouse may have sacrificed a career to care for the home and children. They may have diminished ability to find employment after divorce, so the court may decide a fair and equitable division involves assigning the marital home, a vehicle, and appropriate funds to that parent so they can continue to care for the children. When you speak with your divorce attorney, they can assess your situation and help you understand how the court may rule in your case.
Misconception #4: Property Division Isn’t Affected by Child Custody
Child custody (called conservatorship in Texas) can directly impact property division. Remember, the guiding principle is “fair and equitable,” so if one spouse receives full physical custody, the court will likely assign them the marital home to minimize disruption for the children.
The custodial spouse may also receive a greater share of funds or receive child support payments to provide for the children, especially if that spouse cannot work. If any children have special health or educational needs, the court will take those into account. Each case is completely unique, so it’s crucial to speak with your divorce attorney and coordinate with your ex to create a solid parenting plan in addition to an asset division plan.
The family courts in Texas will always rule according to what is in the best interests of the children, so it benefits everyone to present parenting and division agreements that take those interests into account. Otherwise, you could find yourself facing a judge who alters your agreements, adding more stress to an already difficult process.
Misconception #5: It’s Mine Because Only My Name Is On It
Many assume that an asset is solely their property because it’s in their name alone. For example, if you buy a car with your own funds, you would expect that it’s yours, even if your spouse drives it. However, if you bought it during the marriage or paid any expenses from a shared account, it’s considered community property.
For property to qualify as separate, it must meet certain criteria, such as:
- You owned it before marriage.
- You inherited it.
- You received it as a gift.
- You received a personal injury settlement (excluding lost wages).
- You have a pre- or post-nuptial agreement specifying that the property is in your name only.
Fortunately, if you owned an asset prior to marriage or inherited it and its value increases, the increased value is still considered separate property.
So, if you received a vacation home from your great aunt that grew in value from the time you married until your divorce, the property would still be yours in full and not subject to the community property laws.
Misconception #6: It’s Easy to Show Who Should Get What in Divorce
As we mentioned above, there are numerous factors the court examines when deciding who will receive what assets during a divorce case. Even if the divorce is amicable, the process of untangling who owns what can be very complicated, especially when the marriage lasts many years. Spouses tend to mix or “commingle” separate and community property, making it a challenge to track an asset’s origin.
Commingling could involve putting your spouse’s name on a property you owned before you married or sharing bank accounts. While it might make it easier to pay taxes or pay bills, it could mean you inadvertently turn a separate property into a community one, resulting in a large financial loss during the divorce. Fortunately, your attorney can guide you through dividing your property and debt according to Texas law.
Misconception #7: I’m Only Responsible for My Debts in a Community Property State
Unfortunately, everything is divided in a Texas divorce. Debts and liabilities are one area where the court tends to split things more evenly between spouses, so you could be left shouldering half your ex’s student loans. If they brought debts into the marriage, you could argue that those should be assigned to that spouse, but if you paid for the loans at any time, your ex could claim you have an equal share.
If you discover that your ex ran up significant debt without your knowledge, such as for gambling or other indulgences, you and your divorce attorney can work to show how you were unaware, and the court should assign the full debt to your ex. This is where your lawyer may collaborate with an expert in forensic accounting to track each spouse’s spending and provide details to support your claim.
Misconception #8: I Don’t Need a Marital Agreement
Many people consider a prenuptial agreement to be a sign that you don’t trust the person you are marrying. However, if you are bringing significant property into your marriage, it can be extremely valuable in the event of divorce. This contract will give you more certainty and protection in the event of a divorce, especially when it comes to defining what is considered separate property.
Marital agreements can be particularly valuable if you own a business prior to your wedding. Whether or not your spouse contributes to it during the marriage, you can have peace of mind that what you’ve built will remain yours if you part ways. Otherwise, you run the risk that the business will be considered community property and sold if you and your spouse cannot agree to divorce terms.
Contact Terry & Roberts for Help With Your Divorce Agreement in a Community Property State
Even if you live in a community property state like Texas, you may still settle matters with your spouse through a divorce agreement. A marital settlement agreement is the most timely and cost-effective way to resolve divorce issues. Although it may require extensive negotiation, a marital settlement agreement will save you from the expense and hassle of a divorce trial.
Regardless of your particular situation, the experienced team at Terry and Roberts have decades of experience handling family law in Texas. Contact the experienced divorce attorneys at Terry and Roberts today to discuss your specific legal options.