Texas residents may be interested in how the state’s courts divide assets during a divorce. When two people get married, they form a community estate. The assets they accumulate during marriage are part of the community estate. Assets that were owned separately prior to marriage are not part of the community estate. Texas is considered a community property state, which means all assets are considered to be part of the community estate unless a spouse can prove that the asset should be classified as separate.
It can sometimes be challenging in divorce to prove which assets should be separate from the community estate. Assets have a way of blending together over time, which blurs the line between what is separate and what is not. A 401k is a common asset that can be viewed as both separate and community. If an individual has a 401k prior to getting married, those assets are considered separate. Any contributions made during the marriage are considered community.
Another tricky situation can arise when an individual owns a home prior to marriage, but the couple continues to live in the home after getting married. Some of the home’s value may be considered separate, while a portion of the home could also be considered community. In some cases, a financial expert may be needed to sort out the assets and when they were accumulated.
Courts can split community assets in any manner they see fit. They cannot split separate assets. A couple could protect their separate assets by signing a prenuptial agreement prior to getting married. That agreement would forego any courtroom decision with regard to those assets. Couple who are already married could sign a postnuptial agreement to serve the same purpose.
Source: Allen Publishing, “Protecting Your Assets In Divorce“, Charla H. Bradshaw, February 25, 2014