In a Texas divorce, real property can be considered community property or separate property.
Any real property that was purchased during the marriage, no matter whose name the property is titled in, will be considered community property and is divisible by the Court. Any real property that was owned by either spouse prior to the marriage will be considered that spouse’s separate property and will not be divisible.
Exceptions to the Rule
However, there are many exceptions to these general rules. See below the issues that sometimes come up in our high net worth divorce cases:
Did you or your spouse purchase a home before marriage but while you were dating?
Texas follows the inception of title doctrine. This means that the Court will look to when the property was purchased to determine its characterization. If a house was purchased prior to the marriage, it will be considered separate property. However, the other spouse will likely have a reimbursement claim as discussed below.
Did you or your spouse sign over a deed or refinance the property during the course of the marriage?
This could change the characterization of that property.
Did you or your spouse use community funds (i.e., income earned from employment during the marriage) to make the mortgage payments on a separate property home?
If so, the other spouse could be entitled to a reimbursement claim for the amount equal to the reduction in principle on the loan.
Were improvements or fixtures added to a separate property home during the marriage?
Fixtures and improvements will retain the same characterization as the underlying property; however, they could be subject to a reimbursement claim from the non-owner spouse.
What if you or your spouse purchased property in another state other than Texas?
Property acquired by a spouse while domiciled in another state is considered separate property (or vis versa, community property) if it would have been considered separate property (or vis versa, community property) had the spouse been domiciled in Texas when they purchased it.
What if you or your spouse own a rental property that was purchased prior to the marriage?
That property will be considered that spouses separate property, however the rent received during the marriage will be considered community property.
Valuation Disputes with Real Estate and Businesses
In addition to characterization and reimbursement issues, high net-worth divorces can also include valuation disputes.
If the parties can agree on a value of the property, the courts will generally accept that value and divide the equity in the home. Oftentimes however, the spouse wanting to keep the property will have incentive to value the property lower, and the spouse not wanting the property will have incentive to value the property higher. In these cases, Courts will look at appraisals, property tax values, values of other comparable houses sold in the area, as well as the parties’ own testimony.
Oftentimes a business valuation expert is needed in high net worth divorces. There are many ways businesses can be valued and are valued by the Courts, depending on the type of business, the structure of the business, involvement of the parties etc. It is important to reach out to an experienced family law attorney to make sure your interests are being protected.
As you can see, dividing property can be very difficult in a high net worth divorce. Protecting your assets is our #1 priority.