Myths and Misconceptions of Property Division During a Divorce in Texas

It is widely known Texas is a community property state, however, far fewer people understand the application of this term and the mechanics of a property division. As a family law practitioner, I find there are many common misconceptions as to how an estate is divided during a divorce.

Misconception 1: Everything we have is community property.

The term "community property" means all the property acquired by either spouse during marriage is considered community property until and unless a party can establish by clear and convincing evidence that certain property is separate. Tex. Fam Code § 3.003.

Separate property consists of any property that is owned by a spouse prior to marriage; acquired by a spouse during marriage by inheritance; acquired by a spouse during marriage by gift; or received as recovery for personal injuries sustained by a spouse during marriage, not including recovery for loss of earning capacity during marriage.  Tex. Fam. Code § 3.001. By law, the Court may not divest a party of her separate property. Eggemeyer v. Eggemeyer, 554 S.W.2d 137, 140 (Tex. 1977). If a party can conclusively establish by clear and convincing evidence certain assets are separate, those assets cannot be divided by the court and are not factored into the overall division of the estate.

Misconception 2: My spouse and I are each entitled to 50 percent of our estate.

The most common misconception is because Texas is a community property state, each party will receive fifty percent of the community estate upon divorce. Clients are often surprised to learn the Texas Family Code does not contain any reference to a 50/50 division, and there is no legal requirement for the estate be divided in half. In reality, the Texas Family Code provides that in a divorce, "the court shall order a division of the estate of the parties in a manner the court deems just and right, having due regard for the rights of each party and any children of the marriage." (emphasis added). Tex. Fam. Code § 7.001.

The question then is: What is a "just and right" division? The Texas Family Code does not provide a definition or any specific guidance clarifying what "just and right" means; however, case law has given meaning to this term. The Lynch case simplifies the idea by making the distinction between equal and equitable. Lynch v. Lynch, 540 S.W.3d 107, 128 (Tex.App. – Houston [1st Dist.] 2017, pet filed). "Equal division of property is not required, but the division must be equitable." Id. In determining what is equitable, the court may look at several factors regarding the parties and any children of the marriage. These factors may include things such as fault in the breakup of the marriage, the spouses' capacities and abilities, benefits the innocent spouse would have derived from the continuation of the marriage, business opportunities of each spouse, the spouses relative education, physical condition, financial condition, disparity in ages, size of the separate estate of each party, and the nature of the property. Murff v. Murff, 615 S.W.2d 696, 699 (Tex. 1981).

Misconception 3: My spouse and I will each get half of each asset.

As previously discussed, the overall division of property in a case may be something other than 50/50. For illustration, however, let us assume a case wherein the just and right division is a 50/50 split. How then, mechanically, is each asset divided? Assume a community estate of a divorcing couple consisting of a house with $200,000 in equity, the husband's 401(k) with $250,000, and an IRA of the wife with $50,000. At the outset, the husband might believe the house must be sold so he can get his 50 percent equity. The wife might believe she is entitled to half of the husband's 401(k). While it is possible that in an agreement, the parties could come to such a resolution, such a division is likely not the most efficient means of division. If the case were to be decided by the trial court, it is unlikely this outcome would result.

Instead of dividing the estate by cutting each asset in half, it is much more efficient to arrive at a 50/50 division of the overall estate. My advice would be to view an estate as one large pie, with each asset making up the pieces. When you divide a pie, you do not cut each individual piece in half, instead, you cut the pie as a whole. The same principal should apply to the property division in divorce. In the example above, it would be far more sensible for the wife to receive the house and her IRA, and husband to receive his 401(k). There would then be no need to sell the house, and it would avoid the cost of preparing a Qualified Domestic Relations Order to divide husband's 401k.

These broad misconceptions are just the tip of the iceberg when it comes to the intricacies involved in a property division in Texas. If you or someone you know is facing a divorce, it is important to find a trusted, board certified family law practitioner to help clarify these and other myths and misconceptions.

Holly Rampy Baird is a Family Law attorney and partner with the boutique firm Orsinger, Nelson, Downing & Anderson, LLP, and is board certified in Family Law by the Texas Board of Legal Specialization. A zealous advocate for her client, whether in settlement negotiations or in the courtroom, Holly handles all types of Family Law matters, including child custody cases as well as pre-and post -nuptial agreements. She has a background in finance and economics, which gives her the knowledge and experience to handle complex property matters in divorce, as well.