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How is property divided during a Texas divorce?

The value of things you own and owe becomes extremely important on at least two occasions: estate planning and divorce. Many Houston couples marry without full knowledge of the assets and debt a marital partner brings into the union. Some divorcing Texas spouses aren’t sure what constitutes marital property.

Spouses share ownership of property obtained during marriage including earned income, retirement accounts, investments and property titled in one name. Assets acquired before marriage stay with the individual, but continued solitary ownership depends on what happens with the property during marriage.

Before assets and debt can be divided, they must be identified, valued and categorized as separate or marital property. In Texas, property remaining separate, during marriage and after divorce, includes premarital assets and debt, inheritances, gifts and personal injury damage awards. Property must not be commingled with marital property – known as community property in Texas — to retain a single ownership status.

A spouse who inherits $500,000 during marriage is the exclusive owner of that windfall. But, let’s say the money is placed in a joint savings account. The property may no longer be considered separate, since the funds are presumably “gifted” toward the marriage.

Increases in separate property values generally benefit one spouse, but income derived from separate property is considered joint property. To make matters even more complex, property division rules contain exceptions to exceptions. In short, when property is acquired, whether it is commingled after marriage and how it is maintained or improved influence the separate property status.

Texas property division laws require a 50-50 split for divorcing couples who don’t agree to other terms. Receiving a fair settlement may not equal slicing the pie in half when future tax considerations or other costs are factored into property value. Attorneys have the resources to help spouses cope with divorce-related financial issues, including asset valuation and long-range effects of property division.

Source: Institute for Divorce Financial Analysts, “Who Gets What? Dividing Property During Divorce” Tracy B. Stewart, accessed Feb. 05, 2015

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