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How Does A Court Divide Property? In Texas, upon divorce the court's function is to enter a "just and right division" of the parties' property. There is no set formula or calculation for doing such. The court is limited generally by the type of property involved, it classification as to the nature of the property, and what the judge determines is a just and fair division. The classification of the property is divided into two basic types. These are named: "separate property" and "community property." The court may never divide separate property, but must award it to the person who proves the property is his or her separate property. However, the court may consider the amount, extent and nature of each of the parties' separate property in dividing the parties' community property ( -- among other things such as fault in the breakup of the marriage, and the relative earning abilities of the parties to name but two). What is Separate Property? Separate property is defined as: (1) property owned prior to the time of the marriage; or, (2) property acquired at anytime by gift or inheritance; or, (3) recoveries for personal injuries sustained at anytime (but lost wages which are recovered which would have been earned during the marriage are community property); or, (4) "mutations" of property or better understood as other property exchanged for any property defined by nos. 1,2 or 3 above. Number one above is relatively easily understood. If you owned something prior to the marriage, it is your separate property. Number two is also relatively easily understood. If someone gave you something as a gift, or if you inherited anything during the time of the marriage, it is your separate property. Number three is somewhat more complicated. Recoveries for personal injuries sustained at anytime are considered separate property of the person who sustained the personal injuries. However, any recovery of wages (salaries, hourly wages, bonuses, etc.) which would have been earned during the time of the marriage is considered community property and subject to division upon divorce since this is money which would have been community property. Number four is a very technical area of the law. In simplest terms it provides for the "mutation" or change of one type of property into another type of property without losing its character as "separate property." An example of this would be if you owned $10,000 in cash at the time of your marriage. During the marriage you used the $10,000 -- which is your separate property because you owned it at the time of the marriage -- to buy a piece of art work, or a motor vehicle, or any other item of property. During the marriage you then sold the artwork for a profit, or the auto for a loss. In either event, the cash you receive from the sale (or "exchange") remains your separate property. The court can not divide or "divest" you of your separate property upon divorce, but instead must award it to you. What is Community Property? Community property is relatively simply in definition. It is everything else. It is everything which is not "separate property." Regardless of whose name may be on the title, deed, insurance policy, share of stock or bank account -- to name but only a few things of property -- it is presumed community property and, unless this presumption is disproved by the other spouse, the property will be divided upon divorce. Community property is often defined as property obtained or acquired by either of the parties during the time of the marriage -- as long as that property is not acquired by gift, inheritance, an award for personal injuries, or a mutation of other separate property. This includes wages earned, salary, bonuses, and any other thing of value received. How Does Someone Prove Property Is Separate Property? To rebut this presumption, the person who is claiming to the property to be "separate property" must prove such by "clear and convincing evidence." While this term of proof is hard to pin down practically speaking, it is a burden greater than the "preponderance of the evidence" standard routinely used in civil case, but it is less than the "beyond the reasonable doubt" standard used in criminal cases. It means the party seeking to rebut the presumption must leave little doubt as to the separate property character of the item claimed by him or her to be their separate property. The process of proving something is separate property is often called "tracing." This refers to the process of the party making the claim tracing the origin of the property to his or her inception of ownership of the property. In the example used above, this would involve proving you owned the cash, proving you purchased the artwork or auto with the cash, and then proving the funds in issue are the same funds you received for the sale or exchange of the artwork or the auto. Of course, cash in an account in and of itself has many rules of determining what is separate and what is community property -- all favoring property to be found to be community property. Such is far beyond the scope of this simple explanation of marital property issues. However, you will need to discuss such with your attorney. Can Property Be Mixed? Property is always separate or community. It is never blended or made a hybrid. However, property can be commingled in such a manner or to such an extent it is impossible to accurately "trace" or to "trace" the character of the separate property in a cost-effective manner. This is often seen in stock brokerage accounts which originated as separate property, but community property wages were contributed into and numerous purchases and sales of stock were thereafter completed. While it is technically possible to trace the account's status, the sheer effort and cost of it may make it a losing proposition. In any event, it is certainly something you want to discuss with your attorney. Can A Claim Be Made Against Separate Property? The starting point is separate property can not be divested (or taken away) from the person who claims and proves such property is his or her separate property. However, the other spouse may make a claim against such separate property. This normally is in the context of what is called a "contribution" or "reimbursement" claim. If a spouse has used community assets to increase in value his or her separate property estate, the community estate is entitled to a reimbursement from the separate property owner of the value of such contribution. Since the "time, toil or talent" of an individual is normally the basis for the earning of wages during a marriage -- which are considered community property or community assets -- if a spouse uses his or her "time, toil or talent" to increase in value the spouse's separate property, the community estate is entitled to make a claim against the separate property for the value of such "time, toil and talent." Of course, the spouse may have also actually used tangible community property such as money or other assets to increase the separate property's value. A reimbursement claim should be made to recover the value owed to the community estate -- which will be divided by the court between the parties. How Is Property Valued? Property is valued in a number of ways. The law allows an owner of property to give an opinion as to the value. This opinion, naturally, must be reasonable and based on something other than the ownership. Values may be made by the general marketplace such as the value of stock or automobiles -- to name but two, or things may simply have a value such as money. Often it is necessary to have items' values appraised by persons who are qualified to do so. Often the parties also agree on values. Values are normally set at the time of the entry of the divorce. Some things may fluctuate widely and it is a matter of timing in obtaining the best valuation for divorce purposes. For example some Internet stock which was once worth millions today is valueless. Normally, both attorneys for both parties file a sworn Inventory and Appraisement of the property claimed by the parties as separate and community, as well as the values of such items of property. If the parties can not agree as to the values or as to the separate or community character of the property, the judge (or jury) will make such determinations in dividing the property. The parties will present their proof and let the factfinder (judge or jury) decide as to the character and value of the property. How Are Liabilities Divided? Liabilities are much like assets. They are separated into separate and community property indebtedness as well. However, community property is thereafter divided into categories depending on the type of and extent of management and control each spouse had over the property. (Assets are categorized as well, but division of those assets is rarely controlled by such categories.) Unlike assets, liabilities involve third parties -- the person or entity to whom the indebtedness is owed. While the court has jurisdiction over the parties to the marriage, unless the creditor is made a party to the lawsuit, the property judgment contained in the divorce decree does not control these third parties. It is crucial you disclose to your attorney every debt, the amount of it, the nature and character of it (or facts from which such can be determined), and the terms of such so he or she can make arrangements in the decree for such. A typical example of problems which may arise is the marital home. Often one party will take-over the property and receive a deed from the other spouse. The person assuming the debt will do so in exchange for the deed conveying the other spouse's interest. Unfortunately, normally the spouse who has conveyed his or her interest in the property has not been released from the obligation to pay the mortgage, taxes and insurance on the property. If the spouse who has accepted or assumed the obligation (along with the deed to the other spouse's interest in the house) defaults on the debt, the property is not only foreclosed on without notice to the innocent spouse -- whose credit has now been ruined -- but the innocent spouse remains on the hook for any debt owed to the mortgage company, or for past taxes on the property. The same misfortune can befall a person whose ex-spouse defaults on paying credit card charges awarded to the other spouse in the divorce. It is imperative the divorce decree provide remedies for such problems, as well as notice requirements for the potential third-party claims made against the other spouse for which the innocent spouse can be held liable. Your attorney should be able to fashion a solution for your unique situation and protect you as well as possible. Make certain you discuss this with her or her. In the event your ex-spouse does default, you have -- depending on the language in your decree -- various remedies available to you. The problem is you must bring an action against your spouse to recover the damages sustained by you. As such, it is imperative the decree provide for a "just and right" division in the first place. -- The Law Offices of Steven E. Rogers |