In this blog series, we are addressing one of the firsts questions asked in the event of divorce: who gets what? This can be a simple or complex task depending on the specific intricacies involved, and a financial expert can help navigate and provide direction. As discussed in Part 1, in Texas, before property is divided, it should first be characterized as either community property, separate property, or mixed property. Here, we will discuss the first classification: community property.
Texas is a “community property state,” meaning that most assets and debts acquired during the marriage are shared equally or owned jointly by both parties and, thus, should generally be split 50/50 upon divorce. These assets and debts are characterized as “community property” and primarily consist of: 1) earnings and income produced during the marriage, 2) any subsequent assets purchased with those funds, and 3) any debt attained during the marriage. It is important to note that the name on an account, whether it be a financial account, loan, or other asset, does not assign character – the original source of the underlying funds does. For instance, if Husband and Wife keep their finances separate- Husband has a bank account into which his paychecks are deposited, Wife has a separate account into which her paychecks are deposited- these earnings are still community property regardless of what account they are deposited into. Additionally, any assets purchased with these funds are also community property and, thus, divisible between both Husband and Wife. Division of the community estate is generally 50/50 in Texas, though there are a number of factors and circumstances which could support an inequitable division of the community debts and assets, such as a substantial and disparate difference in earning potential between the divorcing parties. The decision to deviate from a 50/50 split of the community estate is a judgement call that may be made by either the parties in mediation or by a judge in court. It is important to note that all debts and assets held within a marriage, either individually or jointly, are assumed to be community property unless proven otherwise. This is important to know when we discuss separate property in the next blog.
While the process of determining property character and the appropriate division of debts and assets in the event of divorce can be simple or complex depending on the specific financial intricacies of your marriage, even “simple” divisions can feel overwhelming in the event of such a trying time as divorce. Our financial experts are aware of both the financial and emotional trials experienced during this time and will offer knowledgeable and compassionate guidance. If you are interested in a consultation or retaining us as your financial expert, or if you have more questions, give us a call at (469) 467-4660. Or, mention our name, Ahuja & Clark, to your family law attorney and they can reach out to us directly on your behalf.