One of the most important aspects of divorce proceedings is the division of personal property. The assets of the divorcing couples must be recognized, valued, and divided fairly among the partners. The concept may seem simple, but it’s actually complex and time intensive and it could take years to finalize.
In Texas, the divorce laws are complicated. That’s why you should always contact an experienced family law attorney to navigate through the process. Here, we will offer some insights on how a typical divorce affects the division of property between the partners. This can help you to make the right decisions the first time around, so both parties benefit as they should.
How Divorce Affects Wealth in Texas?
A judge will decide how the property will be divided between divorcing partners. A Final Decree of Divorce is generally issued by the court. This document will list all commercial properties that each of the spouses can keep or how the proceeds of the property will be split.
The Final Decree of Divorce will also include the debt of each spouse. Moreover, the legal divorce document will contain details on how the retirement benefits will be divided after the finalization of the divorce.
Not all personal property is divided among the partners in the state. Only commercial property is divided, while the separate property remains untouched during divorce proceedings.
Segregating Commercial and Separate Property
The Texas family laws do not allow division of separate assets in a divorce proceeding. The assets include everything that was owned by each partner before the marriage. Also, assets that were obtained during the marriage through inheritance or gift, as well as personal injury awards, cannot be distributed.
The owner of the separate property has the burden of proving why the property should be in this group. If the partner proves that an asset is a separate property, it won’t be distributed in case of a divorce.
The law allows the distribution of assets that were obtained after the marriage. These will be distributed in the event a divorce case goes to trial. The most common type of commercial property that is divided after a divorce is the family home. Also, clothing, jewelry, and intangible assets such as dividends, income, and benefits are included in this category. All of these must be divided between the partners after the end of the marriage.
In Texas, the date of obtaining a property will determine whether it’s a separate or commercial property. The title does not affect the status of the property.
The Formula for Dividing Commercial Property
In some states, commercial property is divided equally between the partners. However, this is not the case in Texas. When dividing a commercial property, the judge will assess which of the two partners has a greater need for the property. Some of the factors that will be considered when dividing the assets include the following.
- Health condition
- Earning ability
- Custody of the kids
- The value of separate property retained by a partner
Each of the above factors will be given a score, and the spouse who has the higher score will be given precedence when dividing the property.
The judge may decide to award one partner more share in the property compared to the other. In other words, the law mandates that the division of the property should be ‘just and right.’
Apart from the above four factors, a judge may also give a verdict based on many other factors. Some of the factors that can be assessed to ensure the fair and right judgment include the following.
- Domestic violence
- Gifts to someone other than the partner
- Community liabilities debts
- Investment in the community estate using a separate property
- Increase in value of separate property due to the efforts of the partner
- Tax implications of the divided property.
The court has complete discretion on how a community property should be distributed among the partners. However, reasonable basis is necessary for any unequal distribution of the property.
How Divorce Affects a Mortgaged House?
Mortgage payments are not affected by a decree of a divorce. The mortgage payment can be sought from both partners. For instance, if the judge orders that the house should be given to your partner and the partner does not make the payment, the mortgage company has the right to demand the payment from you.
A mortgage company has the right to seek payment from one partner even if the judge has ordered the other partner to make the payments. In this situation, it is best to hire an experienced family attorney.
If you have been awarded a property by the judge, you need to get a Special Warranty Deed signed by your partner. This document should be submitted to the property record office. Submitting the document is important, or else you will face trouble when selling the property. Get the help of a legal expert to craft this important document after divorce.
Lastly, the order of a court asking a spouse to pay part of the home mortgage value needs to be secured by a property lien. This is important; otherwise, you may not be able to get the partner pay the amount. Again, a legal family law expert will help you address the issue.
Division of Property with Mutual Agreement
During the divorce process, the couple will also have the opportunity to agree upon the division of property through a mutual consensus. In this case, a marital settlement agreement should be made by both the partners, and it should be submitted to the court. The agreement will contain details of how the property will be distributed as well as the provisions for the sale of the property. For instance, it can state that the husband will retain retirement benefits, while the wife can keep the property.
In most cases, the court accepts a settlement agreement without any involvement. The court will decide the matter only when the couple is not able to come to an agreement regarding the division of property.
Alimony payment is made by one partner to help the other meet the minimum needs after filing a divorce. The amount of alimony is at the discretion of the court. This amount is separate from the community assets divided among the partners.
The courts in Texas consider different factors when determining spousal maintenance payments. Certain factors are assessed in determining whether a spouse can receive the alimony. Here are some of the things that are evaluated when determining the amount.
- History of family violence against the children or spouse
- Inability to support due to a disability or being inadequate
- Custody of a child
- Period in marriage
For alimony payments, the couple should be in a marriage for at least 10 years. Even when the alimony is awarded, the spouse who seeks the amount should make an adequate effort to secure the income. This is important, or else it is assumed that the spouse does not need any alimony.
After the judge decides that a partner deserves alimony, the next step is the calculation of the alimony amount. The court will also consider a partner’s ability to make alimony payments. The skills and education of the spouse will determine how much alimony he or she can afford to pay to the partner.
The financial resources of each spouse will also be considered when determining the amount. Other factors that will be considered when determining the alimony award include employment history, emotional and physical health, and how payment of alimony will affect the partner’s ability to meet their own basic needs.
Effect of Tax Cuts and Jobs Act
The Federal Government has passed a Tax Cuts and Jobs Act last year in December. This law will affect the tax returns of corporate entities, businesses, and individuals. In addition, the new law will affect family law and divorce cases.
The amount of alimony will be affected by the new law that was enacted by Congress. It will change how the amount is calculated, while keeping the costs down.
Under the new law, the person who is responsible for making the payments will not be able to deduct the payment from the income for taxation purposes. The recipient of the alimony will also not be able to pay any taxes on the recipient.
While the new law sounds good for the recipient of alimony, this could actually discourage the other partner to agree to pay a high alimony amount. The partner may try to fight for a reduced payment. In addition, the partner may use legal options to get compensation for the loss of tax benefits such as getting the court to agree to transfer the retirement benefits or commercial property.
If you have made any pre-nuptial agreement with a spouse, the agreement needs to be revised according to the new tax law. A postnuptial agreement should also be revised and re-examined in light of the latest laws.