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Is Texas an Equitable Distribution or Community Property State?

Posted by Robert Luttrell | Jul 16, 2017 | 0 Comments

When spouses divorce, one of the most crucial elements in the divorce settlement is the division of property and assets. Texas is a community property state, which essentially means that property acquired throughout the marriage belongs to both spouses and, therefore, must be divided in the divorce. Property or assets acquired prior to the marriage, however, is considered separate property and is not subject to division. While the concept of separate and community property might seem straightforward, it can get a little complicated, particularly if a spouse wants to challenge the other's claim over it.

What is Considered Community Property in Texas?

Community property is defined as any property acquired during the marriage that is not separate property. Separate property is usually anything that either spouse obtained before the marriage, though it can also be gifts received by one spouse, recoveries for personal injuries sustained by one spouse, or property inherited by one spouse, even if it was acquired during the marriage. For personal injury awards, the portion intended to compensate for lost earnings during the marriage would be subject to division.

All other forms of property or assets would be community property and divided amongst both spouses.

How is It Divided?

In the state of Texas, community property must be divided in a manner that is as equitable as possible. In dividing community property equitably, the court considers several factors such as the reason for the breakup of the marriage, disparity of earning power between spouses, the health of each spouse, which spouse has custody of the children, each spouse's education and future employability, and more.

Is a Spouse Entitled to a Portion of the Other's Pension and Employment Benefits?

Pensions and employee benefits are subject to division upon a divorce. If the court were to award a portion of a spouse's retirement benefits to the other spouse, their attorneys would have to prepare what is known as a Qualified Domestic Relations Order (QDRO), which would be sent to the employer, ordering them to distribute benefits as ordered.

For cash accounts, such as a 401(k), the employer would typically disburse funds within 30 to 90 days. For benefits that are meant to be paid upon retirement, the employer would receive a calculation of the percentage to be applied when payments begin. Just as with other community property assets, retirement accounts are not necessarily divided equally between spouses, especially if a spouse is receiving a sizeable amount of other community property that makes up the difference.

What About Businesses or a Professional Practice?

Every asset needs to be accurately valuated during the process of property division and businesses and professional practices are no different. One of the most difficult aspects of this task is valuing “goodwill.” It is a challenging part of valuation since it is the intangible value that most businesses have based entirely on their brand or reputation. Even businesses that cannot be sold on the open market have a goodwill value.

Since this is relatively more complicated than other aspects of property division, it is best for a certified public accountant or business appraiser to be consulted on its value and to prepare and provide a written report.

Asset & Property Division Attorney in Cleburne, TX

Property division is one of the most complex aspects of divorce. Both parties might not agree on what is community property and what is separate, leading to difficult hurdles toward a mutually agreeable settlement. To make this process run smoothly and to protect your interests, you should seek the advice of a skilled Johnson County family law attorney. At the Law Office of Robert E. Luttrell, we have experience in helping couples valuate and equitably divide a wide range of assets, including businesses, real estate properties, stocks, pensions, employment benefits, and more.

About the Author

Robert Luttrell

Learn more about Attorney at Law, Robert E. Luttrell III Attorney Robert E. Luttrell III is a dedicated attorney who has years of experience in various types of law including family, divorce, child custody, criminal defense, b...

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