How is Property Divided in Texas Divorce?

Austin, Texas Divorce Lawyer Explains Community Property

Video Transcript:

Jillian French: 

I think oftentimes, it's a good idea for clients to come in with things that they feel are non-negotiables and things that they feel are negotiables, but they'd really want.

Rob Rosenthal: If you're considering a divorce, do you understand how division of property happens in the State of Texas? Well, we're gonna find out the answer to that and a lot of other things right now because that's what we're going to ask the lawyer. Hi again, everybody. I'm Rob Rosenthal with askthelawyers.com, and my guest is Attorney Jillian French with the Vaught Law Firm. I wanna let you know that if you'd like to ask Jillian any questions about your situation, just go to askthelawyers.com, click the button in the upper right-hand corner of the screen that says, Ask a Lawyer, and it'll walk you right through the process. Jillian, good to see you again. Thank you for making some time to help us out.

Jillian French: 

Thank you for having me again.

Rob Rosenthal: 

So obviously, division of property is a big part of divorce, so let's just start. Tell us a little bit, you'll have to dumb it down for me a little bit. What's the difference between separate and community property as far as Texas is concerned?

Jillian French: 

In a divorce situation, all property is presumed to be community property unless a party can show that it is separate. The way that you determine that is, was it property owned prior to marriage? Was it property obtained through some sort of inheritance? Or was it property that was obtained through a gift that was just to that spouse? That is how we determine it, and then we have to go through the tracing process to track down when the person obtained the property through what means and prove that to the court.

Rob Rosenthal: 

Alright, so let's say we figured out what is community property, then we worry about dividing that up, and I think in Texas, just and right division. Explain what that means, and how does it work? Is it always just 50-50?

Jillian French: 

I think a lot of people will start out with a baseline of 50-50, but technically, there's no code provision or statute that says all property will be divided 50-50. In fact, we use the standard of just and right division. A just and right division will take multiple things into consideration such as one spouse's education, future employability, fault in the breakup of the marriage, disparity and income of the two spouses, and the list goes on. So it isn't automatically a 50-50 though I do think that's where most people start out at, and then adjust from there, depending on the list of factors that we have to help guide us.

Rob Rosenthal: 

Now, let's talk about some specifics. Let's say one spouse owns the residence, it's just their name on the title, for whatever reason. Does the other spouse have any claim to that property as far as when it comes to dividing it up?

Jillian French: 

In Texas, we have what's called the inception of title rule. So whether or not one spouse's name or both spouses' names are on the property or the deed, which would be for a house would have a deed associated with it, we are gonna look back and see at what point was this property obtained, and if they're building a property or a new house, and it was built... Started right before marriage, but was completed during marriage, again, we go back to at what point in time was there a earnest contract signed, at what point in time was a deed obtained. It all depends on when that title to that property happened, and then after that, you can get into, was it separate property funds that were used? Was it community property funds that were used where you might have a mixed characterisation issue with the house being partially separate property and partially community property? And you then go from there.

Rob Rosenthal: 

It sounds like no easy answers to any of these questions.

Jillian French: 

No.

Rob Rosenthal: And is all this open for negotiation through the whole process? Is that how that works?

Jillian French: 

I think that it's always best to look at things as what could you claim and then what is important to you? I think oftentimes it's a good idea for clients to come in with things that they feel are non-negotiables and things that they feel are negotiables, but they'd really want, and then things that they know that they're entitled to or could claim, but they don't care much for, because that gives us a better idea of what are the important things I need to try to negotiate for, and what are the things that I can offer to get my client this other property or item that's really important to them.

Rob Rosenthal: 

That makes good sense. What about retirement benefits? Say a 401k or some other retirement plan, how are those divided?

Jillian French: 

Going back to, again, the concept of inception of title, we look at, at what point in time did this retirement benefit accrue? What kind of benefit is it? A lot of times people will call them employment benefits as well, because you can get restricted stock units as part of employment that continue over time, or the grants are for a longer period of time, you can get stock options. At what point did those stock options accrued? Did you get additional stock options for additional years of employment? For the 401k, it becomes a bit easier because you can just look back at, well, what was the balance, if any, at the time of the marriage, and what happened during the course of the marriage to change that dollar amount or that value? Was it simply interest accumulation? Was it additional contributions to the 401k? Was it some other way to help grow that value, and that's how we're gonna determine whether or not how much of it or whether it's separate or community property.

Rob Rosenthal: 

And I don't wanna get too deep in the weeds here, but you made me think of something else. So let's say somebody gets divorced and you're figuring out how to divide up the 401k, but they're not gonna be able to access that, say for another 20, 30 years without penalties and all that. How does that worked out?

Jillian French: 

What we do is, for example, in dividing a 401k, we would submit a qualified domestic relations order to the court in addition to the final decree of divorce. What that does is, it separates out whatever amount has been agreed to or awarded to the other spouse into their own similar type of account. So if it was a 401k, they're gonna have their own 401k with the same plan administrator, same company, and then from there they can continue to have the retirement in that account, they can roll it over to another account, they can basically do whatever it is that they want with it at that point in time 'cause it's their money. Some of them will have some grace periods of you can roll it over only if it's within so many days. So it's always important to check with the plan administrator and most importantly, check with a tax professional on what the implications are of doing various things once that money is in that separate account.

Rob Rosenthal: 

So far, Jillian, we've talked about assets, what about debts or liabilities. Are those community property? Are those divided?

Jillian French: 

So there's this kind of myth of community debt, which is a largely misunderstood area for even a lot of attorneys. Debt is secured by something, so if the debt is secured by a community property item, maybe a house, that's gonna be a community liability. If the debt was secured by solely looking to a separate property item, like if the house was separate property, that's gonna be a separate debt. Then we have the idea of, well, what about credit cards? Credit cards are a little bit harder to figure out because the way that you can create something where it's a joint liability, which is really what we're looking at, is it a joint liability or is it a separate liability, is wasn't a spouse acting as the agent of the other spouse? Or was the debt incurred for necessaries such as food, clothing, shelter during the marriage, even though it's only looking at one spouse's credit or only in one spouse's name?

Rob Rosenthal: 

Again, complicated answers, and it's obvious why we need somebody like yourself to sort all this out for us.

Jillian French: 

Yes.

Rob Rosenthal: 

Really helpful information as always, Jillian. Thank you for making some time to answer our questions, I appreciate it.

Jillian French: 

No problem.

Rob Rosenthal: 

That's gonna do it for this episode of Ask the Lawyer. And my guest has been an Austin attorney, Jillian French, with the Vaught Law Firm. I wanna remind you, if you'd like to ask questions about your situation, it's easy to do, go to askthelawyers.com, click the button in the upper right-hand corner that says, Ask a Lawyer, and you can ask away right there. Thanks for watching. I'm Rob Rosenthal with Ask the Lawyers.

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