Bob Kalish Family Law Blog on Lawyers.com

Although no divorce is ever really “simple”, certain financial considerations make the process even more challenging.    Difficulty in analyzing the marital assets and true confusion about how to fairly separate them can wreak havoc on current and future financial stability.    

The three estates:

There are 3 possible “estates” in the picture; 1) the marital (or community property) estate 2) the husband’s separate estate and 3) the wife’s separate estate.   In some cases, the spouses may have no separate property of value when entering the marriage. In other cases, one or both spouses have significant separate assets.  A complicated picture emerges when the assets of the three estates become co-mingled during the marriage, especially if the one or more of these “estates” enjoys a great increase in value or suffers significant pecuniary loss.

Is it separate or community?

It is often difficult for non-lawyers, (no matter how educated, intelligent and financially savvy they are) to understand that the legal way of looking at estate division does not always appear logical or practical.   For instance, it would seem easy to determine which property is separate, right?   Wrong!  Consider the following examples:

Example 1:

Wife owns a business for 2 years prior to marriage.  At the time of marriage, the business is not doing well.  Husband joins her part-time in the business for 3 years, then quits his regular job and works full-time with her for 6 years. During the 6 years, she takes off a total of 26 months to “stay home and raise the children” (at his insistence, she says).  After 11 years of operation, the business is doing extremely well and they both want to receive it in the divorce.

Example 2:

A man was severely injured in an accident in 1999.  He received a large settlement in 2001.  He took a large portion of the settlement and bought a very expensive home in the 2001, paid in full and titled in his name.  He married in 2002, and promptly had a deed drawn up, putting his wife’s name on the deed, although she said she didn’t want it.  In 2008, they both agreed to separate and she moved out.  In 2009, they filed for divorce. He says the home is obviously his separate property.  She claims that he made a “gift” to her.   

Answers: 
Example 1: The business is separate property by nature, but since there was a benefit from the marriage and increase in its value due to the time, toil and effort of both spouses, he does have a valid claim against the business value. He can request that the “marital estate” be compensated by “wife’s separate estate” for the money, time, toil and effort expended during the marriage.   There are several different mathematical calculations which can legitimately be used to argue what financial value each spouse is entitled to receive.  What does this mean in English?  It means that unless the divorcing couple finds a way to agree on the value, a trial in a court will ensue, and the decision about the division will be made there.

Example 2:
The wife has a valid gift claim under Texas law.  He will need to gather any evidence that he has to refute her claim.

Remember this:  Even if an asset is ultimately considered to be considered “separate” property that “separate estate” may owe financial reimbursement to the “marital estate”.

Foreign property and conflict of laws:

Another difficult situation arises when one or both of the spouses own property in another jurisdiction, especially if it is another country.  In that case, it is important to properly determine the true value of the property, whether it is separate or community, and how it will be transferred to the proper party once the divorce is final. In order to do that it may be necessary to review laws or documents from the place where the property is located.

Investments, Bonuses and so forth:

Another area of contention and confusion involves investments and bonuses.   A discretionary bonus that can be considered to have been “earned” partially during the marriage and partially after the marriage ends can be a significant source of conflict.   Facts pertaining to bonuses, commissions, investment proceeds, income from rental properties and so forth must be analyzed to determine all possible legal arguments that may be made to justify award of the proceeds in the final decree.

Complicated Debt Picture:

Although the inclination is often to focus on splitting assets, just as much thought should be given to splitting the debt.  It is essential to have an accurate and complete picture of the debts and to be able to extrapolate over the life of the debts to determine what the interest rate and regular payments are likely to be in the future. 

Deciding “who owes what” can be difficult when community and separate debt has been commingled. Business and personal debt may also be commingled and this must be analyzed as well.

Valuation of Assets:

In some cases, it may be necessary to have assets formally evaluated by certified public accountants, tax advisors, financial advisors, property or business appraisers or other such professionals.    It is important to discuss the hiring of these professionals with your attorney first in order to avoid the expense of obtaining documentation that may not be given credence by your spouse or may not be accepted in court.  Having these appraisals done can be costly and by coordination of effort the cost may be shared by both sides.  In addition, both sides often need to cooperate in order to obtain access to all records and documentations and obtain the most cohesive analysis possible.

Alternatives to the everlasting fight:

Although a divorce can easily become an emotional event, and a battleground for control, if you are involved in a financially complicated divorce it is important to be able to analyze the property division in a business-like manner. It is essential to gather the resources to make an informed “business decision” about whether to agree to a settlement or go through to a trial.  

Mediation, settlement conferences, and collaborative law are all important and available processes which can be used to the parties’ advantage in reaching a financially feasible settlement.

With all of these variables, it is important to choose a lawyer to represent you who has experience in dealing with analysis of complicated divorce and is able to effectively analyze and explain all of your options so that you are able to make an informed decision for your future well-being.

Bob Kalish is the founding partner of Kalish Law Office, and has been representing divorce, business, and real estate clients since 1984. He can be reached by email at bob@kalishlawtexas.com. The firm’s website it www.kalishlawtexas.com and the telephone number is 281-363-3700. The Kalish Law Office is located in The Woodlands, Texas, and north of Houston.

The above article pertains to Texas law only and is intended for informational purposes. It should not be used as a substitute for legal advice.