Divorce Attorney in Houston Explains Asset Tracing
Separate Property vs. Community Property in Texas
John K. Grubb is a divorce attorney in Houston who also has an MBA in business and finance. He represents spouses with business interests, high incomes, complex community property issues, and separate property issues. Below, he explains, in general terms, how to use asset tracing in dividing property.
What is Asset Tracing in Divorce?
Asset tracing describes how a spouse can prove an asset is separate or community property. Asset tracing involves gathering evidence on the history of the property to demonstrate ownership of the funds used to purchase the asset. It also shows how it was acquired and whether it was intermingled with community property.
In Texas, all property acquired during the term of the marriage is community property with some exceptions. Community property excludes property owned by a party prior to marriage, or acquired during the term of the marriage by a gift or inheritance. Once you co-mingle it, it is community property. Sometimes it is possible to trace separate property from one source to another. However, it is usually necessary to hire a forensic accountant to trace property.
All appreciation on separate property remains a person’s separate property. The Courts consider all income from separate property to be community income. Items such as interest income and stock dividends are community income. All wages, salaries, and other earnings for personal service are also community property. The significance of community/separate property really comes into play upon divorce.
In Texas divorces, Don’t the Courts Divide Property 50/50?
People have the popular misconception that, upon divorce, the Court divides community property 50/50. That is not the case. Texas law provides that, upon divorce, the community estate of the parties shall be divided in a manner the court deems just and right having due regard for the rights of the parties and any children of the marriage.
There are about 20 different factors that a court utilizes in dividing community property unequally. The primary ones seem to be education, income, future income and health. I am aware of one case many years ago that involved a disabled husband and a wife with a good income. The court awarded approximately 90% of a certificate of deposit to the husband. In the vast majority of cases, the courts will divide the property 50/50, if everything is equal between both parties. If there is a disparity of earning between the parties, then the court moves more toward a 60% division toward the low income person and 40% toward the high income person. Once in a rare while, the court will award one party more than 60%.
Separate Versus Community Property is not Always Black and White
In a divorce, the court cannot divest a spouse of his or her separate property. This is true, even if a person’s separate property appreciated substantially in value. However, the burden is upon a party to trace their separate property by “clear and convincing” evidence. This is sometimes difficult to do.
Furthermore, you have many situations in a divorce where the lines between separate property and community property are blurry. For example, people frequently start out with a house that is clearly community property because they purchased it during the term of the marriage. Then one party uses his/her separate property to either reduce the mortgage, or enhance the value of the house by making substantial renovations. Upon divorce, does the person who put their separate property money into a community house get reimbursed? What about the appreciation in the house because of additions? There are a number of equitable remedies that the courts have used over the years to solve the problem.
Also, you have many situations arise where it is clear that a party had some separate property at the beginning of the marriage, but community income or community property was added to it, and the property has become hopelessly commingled.
Need a Divorce Attorney in Houston for a Property Dispute?
The best advice comes from skilled advisors. As a property division lawyer in Houston who has overseen a great variety of divorce cases, John K. Grubb, understands these situations. You may believe your property to be separate, but your spouse may claim it is community. If this is your circumstance, or if you are about to face a divorce proceeding that may become involved, then call our divorce attorney in Houston TX.
In addition the greater Houston area, our law firm represents clients in Katy, Sugar Land and The Woodlands. Individuals living in Spring, Cypress and Conroe can also contact our firm for legal representation.