Division of Property

Question 1

Requirement to divide property
TFC §7.001

Answer 1

• When a couple seeks to dissolve their marriage in Texas either through divorce or annulment, the Family Code requires the court to divide the community estate and confirm each spouse’s separate estate.
• Court must divide property using a “just and right” standard having due regard for the rights of each party and any children of the marriage.
• Parties should file a sworn inventory and appraisement (required in Bexar Co.) to determine all property in the marital estate. (Remember this is both community and separate).

Question 2

Confirmation of Seperate Property

Answer 2

• Court must identify each person’s separate property and award the property to the spouse who owns it, i.e., “confirm” as separate property.
• Court may not award one spouse’s separate property to the other spouse.
  -Doing so would divest spouse of ownership and would violate state constitutional protections

Question 3

Just and Right

Answer 3

• Community Property must be divided using a “just and right” standard.
• Standard is discretionary.
• Not necessarily 50/50.
• Can be 100% to just one party.

Question 4

Four General Categories Court Can Consider when Dividing Property

Answer 4

Factors based on…
1. Need for support
2. Fault grounds
3. Financial costs
4. Other factors

Question 5

Need For Support

Answer 5

1. Spouse granted custody of children
   (Ex. Caring for a disabled child, Needs of children: larger car better for transporting 4 kids; house with special air filtration system).
2. Disparity of earning power
   (Ex. Education, future employability, abilities, business opportunities)
3. Size of separate estates
4. Health: court can consider health and relative physical conditions
5. Age: usually as related to earning capacity and health
6. Liquidity and income production: of property allocated to each spouse (house not liquid)

Question 6

Factors Based on Fault

Answer 6

1. Fault grounds: adultery, cruelty, felony conviction; abandonment; e.g., physical abuse; drug usage by one spouse; waste of assets. Court can’t grant it if spouse only pleaded no fault.
2. Fraud on the community (see next slides)
3. Torts: assault on one spouse. Note: court cannot double-dip, cannot award disproportionate share due to tort AND award damages for tort.
4. Crimes involving community property. Bradshaw case

Question 7

Fraud on the Community

Answer 7

• When one spouse unfairly or improperly disposes of community property.
  Two types:
  1. Constructive fraud a.k.a., “Breach of fiduciary duty” or “waste”
  2. Actual fraud

Question 8

Constuctive Fraud

Answer 8

• Presumed if one spouse: 1. disposes of community property; 2. at a time when spouses were fiduciaries; and 3 does so without the claimant spouse’s knowledge or consent.
• Property gifted or transferred, e.x., :
  -H changes beneficiary on his life insurance policy from W to his mother; W used community funds to pay for extramarital affair expenses such as travel, meals, gifts.
• Property unaccounted for: when property is unaccounted for by the spouse who was in control of that property. Typically, we see it with money—money was removed from bank account and spouse that removed it cannot explain where it went or what it was used for.
• Constructive fraud does not require intent to defraud/deceive.

Question 9

Actual Fraud

Answer 9

• Intentional fraud :
• 1. spouse transfers community property or expended community funds; 2. for the primary purpose of depriving the claimant of the property; and 3. with dishonesty or an intent to deceive.
• Tx. SCT has suggested that actual fraud involves “heightened culpability” and should yield a more disproportionate split of community property. HNDBK says “presumably this means that while constructive fraud might warrant a 60-40 split, actual fraud might require a 70-30 or 80-20 split.

Question 10

Factors Based on Financial Costs

Answer 10

• Court can consider the financial costs incurred by a spouse while the suit was pending or after final judgment.
  1. Temporary Spousal Support- payment or non-payment of support can be considered.
  2. Expenses to maintain community property-e.g., paying mortgage on house
  3. Attorney’s fees and costs—amount each spouse incurred.
  4. Tax consequences of division: whether property will be subject to taxes, or have penalties associated with it.

Question 11

Other Consideration

Answer 11

1. Length of marriage
2. Nature of property
   * Can one person manage property better? Does asset require person holding it to be licensed? Can one spouse make better use of it—trailer when one person has truck to pull it.

Question 12

Reimbursement

Answer 12

• When one marital estate contributes benefits to another marital estate and the contributing estate wants to be reimbursed for those contributions. Examples include:
  One spouse using separate property to pay off other spouse’s law school loans acquired ;
  One spouse using inheritance money to pay off mortgage of house acquired during marriage;
• If court awards money judgment for reimbursement claim, court can place a lien on property to secure award.

Question 13

Three Ways Court Can Divide Property

Answer 13

1. Partition Property in Kind: award entire piece of property instead of dividing it.
2. Award money judgment: award of a specified sum of money that is to be paid by one spouse (debtor spouse) to the other (Creditor Spouse).
3. Award Partition by Sale: order the sale

Question 14

Partition in Kind

Answer 14

• Awarding entire piece of property to one spouse instead of splitting property in half (or other amount)
  1. Nissan Rogue to wife, Honda Accord to husband.
  2. Dividing into shares and awarding shares (real estate split into two tracts and awarding one tract to each spouse).
  3. Joint ownership.

think of it as “being kind” and not splitting property

Question 15

**Money Judgement **

Answer 15

• If court cannot partition in kind, court may award a specified sum of money to a spouse.
• Three circumstances when money judgment is appropriate
  1. Equitably divide property, when property cannot be equitably divided, spouse can get money judgment instead (e.g., H awarded medical corporation, retirement benefits and home—W awarded money judgment)
  2. Satisfy claim for reimbursement
  3. Satisfy claim for fraud on the community
• Judgments can be secured with liens
  -Most common in divorces are owelty liens: usually involves division of real property where home is awarded to one spouse but other spouse is awarded a sum of money for their share of the home.
  -Liens on homestead allowed: 1. purchase-money debt (mortgage); 2. property taxes; 3. owelty of partition; 4. refinance of homestead lien; 5. work and material in construction improvements; 6. home-equity loan; 7. reverse mortgage; or 8. conversion or refinance of manufactured home.