QUESTION: Is there a formula for dividing marital property in Texas?
ANSWER: Property division in Texas does not have to be strictly equal, with each partner receiving the same value. Rather, it has to be “just and right,” in the words of the Texas statute. This allows a judge to consider the context. This could include:
- Who was at fault in the breakup of the marriage
- Vastly different earning power
- The health of each spouse
- Child custody orders
An example of the considerations that come into play is the marital home. Although couples without children could sell the house and split the proceeds, selling the house might not be fair to the children, whose wishes should also be considered. If the couple determines they wish to keep the house for the children, the spouse with primary child custody might receive a smaller portion of some other property in return for keeping the house.
There are many circumstances that the court can consider when determining what is “equitable,” including fault in the breakup of the marriage, disparity of earning power between the spouses, each spouse’s health, which spouse has custody, the education and future employability of each spouse, and other considerations.
QUESTION: What assets/property is divided when a couple divorces?
ANSWER: In Texas, there are two types of property to be identified and dealt with during divorce: separate property and marital property. Marital property (also called community property) is anything acquired during the marriage. Typical marital property in Texas includes:
- Real estate (ranch, farm, home, land, rental property)
- Bank accounts
- Investment accounts (mutual funds, stocks, bonds, annuities), QDROs
- Life insurance cash value
- Retirement accounts (401(k) accounts, pension plans)
- Profit-sharing accounts
- Stock options
- Personal possessions (furnishings, art, jewelry)
Almost anything acquired during a marriage would be considered marital property; these are just the most common types. Texas is a so-called “community property state”; in other community property states the division of property is closer to a 50-50 split. In Texas, however, judges have leeway to order a division of property that they deem just and fair.
Separate property is property that is yours alone. This can include property (real estate, money, jewelry, art, personal items) that you inherited before and during the marriage, property you bring into the marriage, things you received as gifts during the marriage, and settlements and judgments received in personal injury cases.
Only the marital property is divided; the separate property, once identified, stays with the spouse who obtained it. However, determining exactly which property is marital property and which is separate property can become very complicated. For example, if interest is earned on an account that was brought to the marriage, the interest would be marital property while the original amount would be considered separate property. The interest would be divided between the two spouses in proportion to the length of time the account existed during the marriage.
QUESTION: What is a QDRO?
ANSWER: QDRO is the acronym for a qualified domestic relations order. It is a legal order the divides a qualified retirement plan between the two spouses and changes the ownership, giving the agreed-upon share to the other spouse. It gives that spouse the right to receive a portion of the proceeds of the account or accounts.
QDROs are issued only to give certain individuals a right to the proceeds of the plan: spouses, former spouses, children or other dependents. A QDRO is available only for changing ownership on private benefit and pension plans, i.e., those subject to the Employee Retirement Income Security Act (ERISA). Other types of orders are available for dividing military and public pension and benefit plans from government entities.
QUESTION: How can one value stock options for the purposes of division during divorce?
ANSWER: Like private pension plans, stock options, i.e., the right to purchase employer stock at a favorable, predetermined price, can be valued and divided between two spouses during divorce. Stock options are frequently part of an employee benefit package and are often very profitable if the stock value increases significantly beyond the option price.
Dividing the options can be complicated. If the options are part of a compensation package for work already performed during the marriage, they are considered marital or community property. Those granted for work still to be performed are probably not marital property, as they do not represent compensation for work performed during the marriage. These and other things must be determined before division.
The stock options must also be valued. It is difficult to assign a value to something that does not really exist – what exists is the promise to buy at a certain price in the future. In Texas, stock options are usually valued using the difference between the purchase price and the value of the stock at the time of purchase. However, what about stock options that have not yet been exercised? There is no way to know the value of the stock in the future. This is just one example of the challenges involved in dividing stock options during divorce.
QUESTION: What is the difference between a contested and an uncontested divorce?
ANSWER: An uncontested divorce means that the two spouses agree that they should be divorced and also agree on all aspects of the divorce – child custody, property division, spousal support/alimony, visitation and child support. If the parties do not agree on everything, including on whether a divorce should occur, then the divorce is contested.
QUESTION: What parts of a final divorce order can be changed later?
ANSWER: Under Texas law, either party to a divorce can petition the court to change (modify) a child support or custody order when:
- The circumstances of either parent or the child have materially changed since the last order was issued.
- A child 12 years of age or older tells the court that he or she wants a change in the custody arrangements.
- The custodial parent gives the custody and care of the child to another person.
- A parent has voluntarily given the child’s care and custody to another person.
A change in circumstances could be a parent’s remarriage, a medical crisis, criminal acts or drug abuse, or changes in living that make visitation difficult.
The courts can also review alimony/spousal support orders if the financial circumstances of either party change. Property division orders, however, cannot be modified.
QUESTION: Is a prenuptial agreement only for the very wealthy?
ANSWER: No. Prenuptial agreements can be helpful in a variety of circumstances, including:
- The presence of children from an earlier marriage
- Business ownership
- Significant debt by one or both of the parties
- Property you would like to keep in your family – heirlooms, real estate, etc.
- Significant difference in the wealth or earnings of the parties
- The intention of one spouse to not work outside the home
QUESTION: How long does a divorce take in Texas?
ANSWER: The circumstances of the divorce determine how long the process takes. If the spouses agree on everything, the process takes at least 60 days, the statutory minimum. If the parents disagree, a divorce can take at least six months and up to a year or even more.
QUESTION: How long can the recipient (payee) receive alimony?
ANSWER: A sliding scale determines how long you can receive alimony based on the length of the marriage. In general, if you were married for 30 years or more, alimony can be paid and received for up to 10 years. If you were married for fewer years, the time period for receiving alimony will be reduced.
Additionally, the length of time you receive alimony could be less if a judge determines that you could earn enough to support yourself after additional education and training. The primary exceptions to the time limits for receiving alimony are when a parent is caring for a disabled child or has been rendered disabled by the other spouse.
QUESTION: What special expenses can be included in a child support order?
ANSWER: In addition to supporting the basic needs of the child – food, clothing and shelter – the parent paying child support (known as the obligor) may also be ordered to pay for:
- Post-secondary education or educational enhancements
- Health insurance
- Travel between the parental homes
Of course, the parents can agree on what they will pay for and a judge will simply approve or disapprove the order, based on the standard of the best interests of the child.