When you divorce, the court (or you and your spouse, if you can agree) will divide your property. States can divide property using one of two methods: community property division and equitable division. Equitable division states divide marital property (property spouses acquire during the marriage) "equitably" or "fairly" between the spouses (not always 50/50.) Community property states presume that all property the spouses acquired during the marriage belongs equally to both spouses, regardless of who purchased it and regardless of who has more separate property.
Yes. Texas is a community property state, which means that most property acquired during the marriage belongs to both spouses, and the court must divide it at divorce. In contrast, each spouse gets to keep his or her separate property when the marriage ends.
Whether the judge categorizes property as community or separate is very important when you divorce. Below, we answer some common questions about Texas community property law. For more information on Texas family law, see our Texas Divorce: Frequently Asked Questions page. You can find all of our articles on property division in our Divorce and Property area.
Texas law defines community property as all of the property that either spouse acquires during the marriage, except separate property. (Tex. Fam. Code Ann. § 3.002)
Separate property in Texas is anything one spouse owned prior to marriage. For example, if one spouse inherited property during the marriage, the court will likely classify it as separate property. Other examples of separate property include property received as a gift by only one spouse, and recoveries for personal injuries sustained by only one spouse, except for the portion of the award intended to compensate for lost earnings during the marriage. (Tex. Fam. Code Ann. § 3.001)
The law presumes all property to be community property unless and until the party claiming that it is separate property can prove it by a preponderance of the evidence. (Tex. Fam. Code Ann. § 3.003)
When a couple divorces, Texas law requires that the judge divide their property in a manner that is "just and right,"—meaning that the division of property must be equitable under the circumstances. There are many circumstances that the court can consider in determining what "equitable", including:
To the extent that a married person accumulates an interest in a pension, retirement, profit-sharing, or other employee benefit plan during the marriage, it is community property and subject to division upon divorce. If a court awards a portion of one spouse's retirement benefits to the other spouse, the attorneys will prepare a Qualified Domestic Relations Order (QDRO) to be sent to the employer, whom the court will order to distribute benefits to each spouse in accordance with the court's order.
In the case of a cash account, such as a 401(k), the employer will usually disburse the funds in 30 to 90 days. In the case of benefits to be paid upon retirement, such as a pension plan, the court order will provide the employer with a calculation of a percentage to be applied when payments begin, and order the employer to send the appropriate amounts to the other spouse in accordance with the court's order.
Like other community property assets, the court doesn't have to divide retirement and pension accounts exactly equally between the spouses. If each spouse has a separate retirement account or pension from employment, for example, the court might simply award each of the spouses their own account, particularly if the amounts in each are relatively similar or the award of other community property makes up the difference. (Tex. Fam. Code Ann. § 3.007)
Like any other asset, judges must consider a business or professional practice in the valuation and division of community property. To the extent that one spouse developed a business or professional practice during the marriage, there is a community property interest that the court must deal with in the divorce.
The most time-consuming and challenging aspect of determining the value of a business or professional practice is in valuing "goodwill," which is the intangible value that most businesses have based on their established name or reputation. Even a business or practice that would not typically sell on the open market has a goodwill value, which the court must ascertain when the couple divorces.
Divorcing couples often hire certified public accountants and business appraisers to determine the value of a business or professional practice. The accountant or appraiser will review the books and records of the business or practice and prepare a written report.
If you're going through a divorce in Texas and have questions, avoid making costly mistakes by speaking with an experienced attorney in your area.