In Texas, marital property is divided between divorcing spouses at the time of divorce. By law, the standard for determining an appropriate property division is subjective: it must be “just and right.” Essentially, the financial terms of the parties’ divorce must be fair to both parties.
Only the parties’ community property may be divided between them. Texas law provides that a person may not be divested of his or her separate property. Separate property consists of property owned prior to marriage or acquired during marriage by gift or inheritance, recoveries for personal injuries sustained during marriage (excluding lost earnings recoveries), and property obtained with any of these categories of separate property. Community property is all property acquired during marriage other than separate property. A person’s separate property may appreciate during marriage, and the increased value of that separate property is also separate. Also, a person may sell or transfer separate property during marriage, and the proceeds from such sale and the assets into which the separate property were transferred are separate property. However, income from separate property, such as interest and dividends and rent, is community property. When a divorcing spouse has separate property, it may be appropriate to trace the flow of community income from that separate property to determine what portion of property on hand may have community character. And, contributions made during marriage by the community to enhance a spouse’s separate property may give rise to a reimbursement claim by the community estate, and vice versa in the case of enhancement of community property value by a spouse’s separate estate.
The courts have outlined several factors to consider in determining a fair division of community property. They include disparity in income and earning capacity, the nature and extent of the community assets and liabilities, responsibilities for child care, physical and mental health of the spouses, benefits an innocent spouse might have enjoyed if the marriage continued, separate estates, waste of community assets, gifts by a spouse to the other, and tax implications of the property division. While many divorcing spouses think fault in the breakup of the marriage is an important consideration in determining the fairness of the division of the marital estate, courts vary in their views of the weight that should be given this factor in relation to other considerations that bear more directly on the parties’ post-divorce economic circumstances.
The starting point in working out a fair property division requires the parties to gather information about all assets and liabilities. This process will enable the parties to identify the location, ownership and value of each asset and debt to be taken into account in the final property division. A commonly used form for gathering this information is an Inventory and Appraisement. Parties can often significantly reduce the legal costs associated with their divorce representation by gathering and exchanging with one another the information and supporting documentation reflecting each item listed on the Inventory and Appraisement form.