The Community Property System
When a couple gets divorced, one of the most significant issues involves dividing their marital assets. Texas courts divide marital property in accordance with the community property system of asset division.
In divorce cases, the court will perform a just and right division of the community estate, which is made up of all assets that qualify as community property. Generally, all property than the spouses acquire while they are married is considered community property and is subject to a just and right division upon divorce.
When conducting a just and right division of community property, courts must consider the specifics of each case. A just and right division does not necessarily entail an equal split of the community estate. An unequal division of community property might be just and right, after considering circumstances such as the nature of the property and the conduct of the parties.
In-Kind Division of Property
After the court determines what assets are included as community property subject to a just and right division upon divorce, those assets must be divided between the parties. Conceptually, each spouse has an interest in each asset or item of property. However, the court will perform a global division of community assets if it can help it. This means that specific assets will be wholly assigned to each spouse, also known as an in-kind division.
This method of property division is most appropriate for personal property, where there are several items and assets that can be distributed between the parties in a manner that is considered just and right under the circumstances.
In situations where an in-kind division cannot be applied, the court may resort to a different method that is more suitable under the unique circumstances and conditions of the case. Generally, the divisible nature of an asset or item of property will determine what method the court ultimately uses.
Division by Sale of Property
If a major asset—such as a house—does not lend itself to a just and right division in-kind upon divorce, Texas courts might order the asset to be sold and for the parties to divide the proceeds of the sale between themselves. Known as a division by sale, this method of dividing property is typically necessary in cases where the asset’s value is too large for the court to award it to one spouse and have them buy-out their spouse’s interest.
For example, if the parties have a community property home valued at $800,000 which is paid off, the court could award the house to one spouse and make them pay the other spouse $400,000 for their ownership interest. However, if the spouse who was awarded the house does not have $400,000 to spare—even after accounting for their share of other community property assets and their separate assets—the court could order them to sell the house. If the house sold for $800,000, both spouses might be awarded $400,000 each.
Again, if the court must resort to a division by sale, it must be because this method is just and right under the circumstances. When a divorce involves minor children whose best interests depend on continuity and familiarity of their environment, the sale of the community residence will seldom be ordered.
In such cases, courts will typically award the home to the parent the court-appointed to live with the children and designate their primary residence.
Payments Between Spouses
When the goal of making a just and right division of the community estate cannot be achieved through an in-kind division of assets, courts may require one spouse to compensate the other spouse for their community property interest.
For instance, when property is assigned to one party, requiring them to buy-out their spouse’s community interest, the court may fashion the buy-out in periodic installment payments in the future. A court order involving such installment payments must have specific terms regarding the date, time, and location of such payments.
Generally, these payments are meant to balance the division of community property, in accordance with what the court has concluded to be just and right for the case. As a result, a court’s order to make future periodic payments for this purpose is not considered to be an order for alimony.
When the amount of outstanding marital debts and liabilities exceeds the value of community property, the court may issue a money judgment. As a result, a party in a divorce case should be warned about the possibility of receiving a property settlement order for a negative value. Importantly, such a money judgment may be subject to post-judgment interest in accordance with the statutory rate.
Turn to Coker, Robb & Cannon, Family Lawyers for Legal Advocacy
Sometimes issues concerning the division of community property are some of the most complicated and hotly debated matters in a divorce. To make sure your property rights are adequately represented, you should consult Coker, Robb & Cannon, Family Lawyers. Our attorneys have dedicated their practice to helping our clients with legal disputes arising from Texas family law.
To arrange for an initial consultation regarding your legal interests, please call Coker, Robb & Cannon, Family Lawyers at (940) 293-2313 or contact us online today.