During a Texas divorce, it is certain that the issues surrounding separate property will arise, meaning you will most likely need help from top divorce attorneys in Arlington, Texas. It will be necessary to determine which assets are separate property and which assets are marital property, in order to divide the assets equitably. Of course, like most issues associated with divorce, division of assets can be emotional. One spouse may feel that their separate property is not being considered as such, or that they are being forced to relinquish more of their assets than is actually fair.
At Jackson, Landrith & Kulesz, PC we fully understand the emotions which accompany a divorce, and we take these emotions into consideration as we help you through your divorce. At the same time, we will fight hard for your rights and your future. We will be forceful negotiators when negotiation is the best course of action for you, and we will be aggressive litigators when necessary. Whatever you need during this difficult time, we will provide the legal assistance you need. If you are going through a divorce, whether a simple divorce or a much more complex one, we can help you survive this difficult time in the very best way possible. Contact one of our top divorce attorneys in Arlington, Texas today.
What is the Difference Between Marital and Separate Property?
Just as a merger of two businesses results in the commingling of assets, the marriage of two persons results in a single unit tied together by love, with shared assets and debts. When a marriage ends in a divorce, the big question becomes, how will these “shared” assets be divided amongst two people?
That depends on two key things:
(1) Whether each asset is classified as either marital or separate property; and
(2) How state law divides the marital property. Let’s talk about classification first.
What is Separate Property?
Any property you owned prior to your marriage is essentially considered separate property, as is any property you have acquired during the marriage by virtue of a gift or inheritance meant solely for you. An example of this would be if your parents gifted you money with explicit instructions that the money would be placed in a separate bank account and were meant only for you. Income resulting from this gift—like interest from the money—might be considered marital property, subject to division.
Any property or other assets acquired during your marriage but bought with your sole and separate gift or inheritance also remains separate property, unless the asset is, in some way, commingled with your marital property.
The first complicated part of distributing assets after the divorce is defining what type of property each asset is. State law determines what is deemed separate property, but the states are relatively consistent in defining separate property.
Generally, the following assets are considered separate property:
- Property either spouse owned before the marriage;
- Gifts, inheritances, and bequests received by one spouse before or during the marriage;
- Property or debts designated as separate in legally operative contracts, such as a prenuptial agreement;
- Property obtained with one spouse’s separate property assets (such as buying a new car with inheritance funds) with the clear intent of maintaining the acquired property as separate;
- Personal injury awards a spouse receives during the marriage, except any recovery for loss of earning capacity during the marriage; and
- Money acquired from separate property, such as equity.
Separate property is, generally speaking, the assets that are acquired before the marriage, with some exceptions detailed above.
Nonetheless, this also includes debt. Therefore, a person who entered a marriage heavily in debt will typically be responsible for it following divorce.
What is Marital Property?
Whereas separate property is typically assets acquired before the marriage, marital property is usually all of the assets acquired during the marriage. Note that some states consider the date of separation the end of the marriage. Texas considers community property as the date of divorce, not separation.
The following are examples of what can be marital property if the asset was acquired during the marriage:
- Primary residence, other real property;
- Bank accounts, stocks, and bonds;
- Pensions, stock options, and other retirement and employment benefits; and
- Life insurance policies.
The process of classifying assets is frequently not as cut and dry as these lists. There are some unique issues to remember when dealing with particular circumstances that can change the classification of an asset.
Separate Property Unless…
These basic rules of separate property apply only as long as you keep the property you brought to the marriage or property you acquired during the marriage as the result of a gift or inheritance entirely in your name. If you commingle this property in any way with marital or community property, then it becomes part of your marital property. As an example, suppose you receive a sum of money from Great Aunt Hazel intended solely for your use. On its face, this money is yours, as your separate property.
However, if you put this money into your joint bank account, it has then become commingled with your marital assets, making it part of your marital property—no longer your separate property. The same goes for anything you brought into the marriage, whether in the form of property, vehicles, or money. As long as you keep those things only in your name, completely separate from your marital assets, they do not become part of the marital property. If you add your spouse’s name to your car title, property title, or bank account, you have just turned your separate property into marital property, and there is no going back.
It is important to note that during a divorce, you and your spouse are perfectly free to completely ignore the legalities of separate and marital property, making any division you see fit—so long as you are both in total agreement. As noted, if you have any doubts regarding whether your separate property will remain your separate property during your divorce, contact one of our top divorce attorneys in Arlington, Texas early on in the process.
Special Issues with Classifying Property
One of the first issues that arises when classifying property during a divorce is when the separate property becomes commingled with marital property. For instance, if a spouse transferred investment funds from one account they maintained before the marriage into a joint account, those funds would be marital property because they are now commingled with marital property.
Another way that separate property can become marital property is via transmutation. This occurs when one spouse owns real property prior to the marriage, but transfers title to the property into the joint names of the spouses during the marriage, thereby showing an intent that the property becomes marital property.
Sometimes only a portion of separate property becomes marital property. This frequently happens when a spouse has made contributions or used their efforts to increase the value of separate property. Courts in most states will award the non-owning spouse a reimbursement for the value-added after a close factual analysis.
Pensions are another contentious item that some might assume would not be a problem. Generally, a pension earned during the marriage is considered marital property that can be subject to division upon divorce, which can seem shocking. However, any part of the pension earned before the marriage is considered separate property. Thus, you can divide your marital assets in a strategic way that would allow you to keep your entire pension.
Finally, it is vital to understand what happens to property when one spouse cares for and financially supports another spouse while pursuing education. Courts would not treat a degree as marital property, even if the spouse helped the student partner all those years. Courts state that future earning capacity, and an increase in it, do not match the legal definition of property. However, some courts have adopted an equitable approach of granting the supporting spouse reimbursement in the form of alimony for their financial contributions while the other spouse was obtaining their degree.
Relatedly, courts do not recognize a professional license as a marital asset. Still, they might consider professional goodwill, or a person’s increase in earning capacity due to their reputation, as marital property and distribute its value. Divorcing couples frequently hire public accountants and business appraisers to review the books and records of a business and prepare a written report appraising its value.
Divorce Complicates Everything, Including Property Distribution
After you classify all of a couple’s assets, the property is divided according to state law. Most states use the rule of equitable distribution of marital property. In these states, a judge will divide all of the couple’s marital property, using a litany of considerations and factors as guidelines, to reach a fair distribution based on the particular facts of the case at hand.
It is crucial to note that “equitable” is not synonymous with equal (a 50-50 split). Instead, it means a fair division. Some of the factors a judge will consider in an equitable distribution jurisdiction include:
- The length of the marriage;
- Each spouse’s age and physical health;
- Whether the property distribution is in lieu or in addition to alimony;
- Each spouse’s contribution to acquiring, maintaining, or improving marital property;
- Each spouse’s contribution as a homemaker to the family;
- Either spouse’s actions that may have wasted marital property; and
- Each spouse’s debts liabilities.
In Texas, courts first view the concept of property as 50/50, however, they can and do consider other equitable factors, such as:
- Whether a spouse is a primary caregiver for the couple’s children,
- The amount of separate property each spouse owns, and
- Whether one spouse was at fault in causing the marriage to fail.
The Importance of Titling Assets
The name on the title of assets can play an essential role in treating and classifying the assets. In community property states, it is presumed that any property on hand when divorce is filed is community property. Therefore, the spouse claiming an asset is separate property has the burden of proving their claim by clear and convincing evidence.
One easy way to do this is to show that the property is titled in your name and acquired before marriage. Conversely, if you add your spouse’s name on the title of a house you owned before marrying them, it automatically becomes community property. So, you should be advised to think twice before adding a spouse’s name on the title of any individually owned asset unless you want to potentially lose it.
Overall, ensuring your assets are property titled can prevent headaches down the road from straining to prove something you bought before marriage shouldn’t be taken from you. However, whose name is on the asset’s title is not entirely dispositive of determining the asset’s classification or ownership. Therefore, do not automatically assume just because your spouse’s name is not on the title of the house acquired during your marriage, it is completely yours.
In Texas, for example, the inception of title rule determines the ownership of an asset. This means whether the asset is separate or community property is determined when the asset was acquired. Take the example above of a house bought during a marriage but with only one spouse’s name on it. The house is community property because it was purchased during the marriage.
How Texas Handles Property Distributions Following Divorce
Texas law concerning the division of property following divorce starts at the critical assumption that all property held by the spouses during the marriage is community property. Because Texas is a community property state, courts may split all marital property equally amongst spouses. However, the court can order an unequal division if there are “just and right” reasons.
Jackson, Landrith & Kulesz, PC Can Help You Get Through Your Divorce with the Very Best Outcome
It is often difficult to divide up assets during a divorce. Not only is the monetary value of the assets a factor, there is often emotional attachments to certain assets. Spouses have been known to dispute a certain asset for years, ending up spending more on attorney fees than the asset was worth. At the law firm of Jackson, Landrith & Kulesz, PC, our top divorce attorneys in Arlington, Texas will meet with you to determine what your immediate needs are concerning your divorce.
It might seem impossible to think about it heading into a seemingly happy marriage, but sometimes relationships collapse, and intense, drawn-out battles over assets ensue. Be sure to keep up to date with your records and ensure that any assets you owned before your marriage are titled in your name to avoid losing potentially losing them. Also, remember to look at your specific state’s laws to determine how specific assets will be categorized and how marital or community property will be divided.
Whether you are amenable to collaborative law—a more peaceful way of ending a marriage—or your divorce will need to be litigated, our top divorce attorneys in Arlington, Texas can help. We always fight aggressively for our clients’ interests, informing each client of his or her rights and options. This allows you to make the most informed decisions for your future. Contact Jackson, Landrith & Kulesz, PC today to speak to our top divorce attorneys in Arlington, Texas, who can help you with all your family law needs.