Austin Divorce Lawyer Tip Regarding Separation, Community Property, and Divorce in Texas.

I am asked all the time whether there is a way to "legally" separate in Texas. The short answer to this question is no. There is no "Legal Separation," per se, in Texas. There are no Court proceedings to essentially put a marriage "on hold." To the contrary, even though the parties may be living in separate homes and doing everything separately, the community property presumption still applies to the marriage.

In Texas, all property (and liabilities) on hand at the time of Divorce are presumed to be those of the "community." The community property presumption exists irrespective of whether the parties are living together at the time they divorce, or whether they are separated.

Over the years, I have had several cases where the parties separated and then went on with their lives -- sometimes for many years -- accumulating properties (and debts). Sometimes, the assets, which included real estate, stocks, and mutual funds, appreciated substantially. These assets, just like all of the other property, are subject to being divided by the Court. This sometimes comes as a shock to the party that finds out that they have to share the property that they separately bought, paid for, and maintained.

As a result, when you separate and fail to follow through with a Divorce, all assets are subject to a "just and right" division by the divorce court. Likewise, despite a separation, the debts that are accumulated by either spouse will also be presumed to be community debt. For example, you and your husband separate. He goes out and charges a big screen TV on the joint credit card. Not only is the credit card company going to look to you for payment, the divorce court can order that you pay part of the debt (hopefully, the TV is still around and maybe you can get it).

One way around these problems, is to enter into a Property Agreement Between Spouses so as to eliminate community property (and community liabilities). With such an agreement, the Divorce court could treat all property owned at the time of Divorce as the separate property of one or the other spouse. Even accounts that are jointly owned are oftentimes treated under this type of an agreement (and, hence, by the Court) as being owned 50% by each spouse. Such an agreement could completely avoid the possibility of having the Judge (or worse, yet, a jury) decide what constitutes a "just and right" division of the property.

This type of agreement is a relatively simple document that can prevent the continued accumulation of community assets and liabilities, even during a period of separation. If you would like to set up a consultation with an Austin, Texas Divorce Lawyer, contact Erik E. Cary.

FAQ regarding Divorce # 17: How do we divide any retirement accounts?

Retirement accounts, not unlike mutual funds and some stock accounts, are assets acquired over the course of many years. In dividing these assets during a Divorce, you must first determine the character of the retirement account – in other words, whether it is Community Property or Separate Property (or, perhaps, both – as explained below).

First, purchases or contributions that occurred prior to the marriage would be Separate Property. Next, purchases or contributions that occurred after marriage would be considered Community Property. (Actually, it is a little more complicated than this, when you add in the earnings, losses, dividends and stock splits that occur in most retirement accounts, but the essential point is that such assets have a dual character.) Often, lawyers will hire financial experts to provide an opinion as to how much is owned by one spouse as separate property versus how much is jointly owned as community property, and therefore subject to division with the other spouse.

Also, retirement accounts (like 401k’s) are not usually divided under the Divorce Decree like other assets. This is true because there is often an administrator that is responsible for managing the retirement account. Under federal law, which Texas judges must follow, the Court will not be able to simply order the administrator to liquidate the account and pay it in cash to the respective spouses. Instead, federal law allows the state Court to issue a Qualified Domestic Relations Order (also simply known as a “QDRO” – pronounced for short “Quad Row”). The QDRO will set out how the account is to be divided. Ordinarily, the retirement account administrator will create another account in the amount (usually designated in either a total dollar amount or a percentage of the account as of a date certain) to be paid to the other spouse as specified in the QDRO. When the QDRO divides the account into two accounts, both spouses will be subject to the rules governing the retirement account (sometimes called the retirement “Plan”). Depending upon the Plan, disbursements for particular reasons may be allowed or loans may be allowed. You will need to check with the retirement account administrator to find out the rules relating to the Plan.

FAQ regarding Divorce # 15: What is the difference between "Community Property" and "Separate Property" in Texas?

Texas is a Community Property state. This generally means that income that is earned during the marriage and property that is obtained during the marriage is presumed to belong to both spouses (regardless of whose name may appear on the paycheck or title documents) and is subject to division by the Divorce Court in a manner that the Court deems to be “just and right.”

The best way to define Community Property is to determine what is not community property – then everything else is “presumed” to be that of the community. Generally speaking, either spouse will have a “separate property estate” in the event they acquire property (a) prior to marriage or (b) during marriage by some type of inheritance or by way of a gift. Again, the rest of the property is presumed to be community property.

Spouses can also agree to alter the “community property” presumption through certain types of written agreements. The most common type of such agreement is generally referred to as a “prenuptial agreement,” because it usually occurs prior to the marriage, but spouses can also enter into similar agreements after the marriage.