Dallas Divorce Law Blog : Dallas Texas Divorce Lawyer & Attorney : O'Neil Attorneys Law Firm : TX Child Support & Custody Issues

Many people face financial uncertainty when they divorce in Texas.  Often, this stems from taking the same amount of income that was previously being used to fund one household and splitting it up to cover two househoulds, including two house payments, two utility payments, two sets of furniture, and maybe even two attorneys.  This problem is especially exacerbated when only one spouse works, leaving the other spouse somewhat dependent on the working spouse for money.

The time while a divorce is pending is when you should really tighten the belt and spend only within your means.  Now is not the time to go to Neiman's or have fresh flowers weekly.  Prepare youreself now for the eventuality that your standard of living may change dramatically after the divorce is final. 

One common mistake people make is considering the divorce settlement to be income used to pay monthly expenses, instead of reserving the assets, retirement and other items received in the settlement for self-improvement, reserves, or rainy days.  Doing this will only make it worse when the assets or other funds run out. 

When you are deciding on what assets you and your spouse will take, you should be aware that not all assets are equal. One of you may end up with a huge tax bill when you access the assets: for instance, you could end up paying capital-gain taxes upon the sale of your home or your investment assets. In addition, if you dip into your retirement assets, you may end up paying income tax and a penalty. Consider the present cash value of each asset in dividing things up -- if it isn't cash then how hard would it be to convert it to cash.

Other assets may end up being a money pit. Your primary residence, vacation home, or rental properties could cost you a significant amount of money to maintain. Frequently, the primary benefit of a rental property is not necessarily cash flow, but the tax losses that are generated. If you are in a low tax bracket, then these losses may not benefit you to the extent that another investment would. Your expenses may actually increase. For example, if your spouse used to make all repairs, mow the lawn, etc., but now you have to hire someone to do those things, then your expenses will increase. Would you be better off liquidating these properties and investing the proceeds in something that would increase your cash flow instead of creating a financial drain?

For more info on this topic, see Divorce Magazine's article.

Here's more info on Property and Debt Division in Divorce.

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Divorce is a hard enough time but when you own your own business, managing your divorce and keeping your business alive can be extra challenging.  Here are some tips from Board Certified Dallas Family Lawyer Michelle May O'Neil of O'Neil Anderson:

• Be an open book.  Don't try to hide anything from your spouse.  When discovered, the divorce judge may very well impose greater punishment than the value hidden.
• Hire a good forenic accountant to evaluate the business.  If the business is community property, the value of the business to the community estate will be an essential question in the divorce.
• Know the difference in personal goodwill and commercial goodwill and how that difference may affect the consideration of your busines sin the division of your community estate and divorce.
• The declining economy may have removed much of the liquidity from your business, which may affect the cash available to pay the increased expenses of separating and paying divorce lawyers.
• If both spouses work in the business, it is best to pick one who will stay in the business and one who will exist.  Rarely can people who cannot stay married to each other remain business partners.

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Dallas divorce attorney Michelle May O’Neil and her client prevailed yesterday, February 4, 2010, when the Fifth Court of Appeals issued its opinion in Kee v. Kee, Cause No. 05-08-00013-CV. The appeal in Kee arose from an ex-wife’s appeal of the trial court’s refusal to garnish ex-husband’s wages to satisfy his contractual alimony obligation.  The trial court in this case rightfully found the garnishment that ex-wife requested would violate ex-husband’s constitutional rights. The Dallas Court of Appeals agreed.

The Court of Appeal’s determination turned on whether the alimony payments wife sought to garnish from husband’s wages were ordered pursuant to Chapter 8 of the Texas Family Code, or whether such payments were contractual, as opposed to statutory, alimony. In reaching its decision, the Court of Appeals closely examined the language of the 2006 divorce decree’s alimony provision. The decree lacked the requisite findings for Chapter 8 maintenance; including a finding that wife was disabled and a stated duration of the maintenance obligation, with the specific language of the alimony provision providing in part:

“The Court finds that under the circumstances presented in this case, [Wife] is eligible for maintenance under the provisions of [the] Texas Family Code and the contractual agreement of the parties; and that this alimony obligation is contractual as well as statutory.”

Because the decree omitted the specific findings required by Chapter 8 of the Texas Family Code, the Court of Appeals determined that the “statutory” portion of the maintenance obligation could just as easily be Chapter 7 (the code’s provision for informal settlement agreements between parties) as Chapter 8 maintenance. As the alimony ordered by the 2006 decree was contractual rather than statutory under Chapter 8 of the Texas Family Code, the Court of Appeals determined that husband’s wages were not subject to garnishment, and, therefore the trial court ruled correctly.

The opinion in Kee extends the well-established case law prohibiting the enforcement of contractual alimony by contempt, including In re Green and McCollough v. McCollough, to prohibit enforcement of contractual alimony via garnishment of the obligor spouse’s wages absent a specific provision in the decree allowing for such a remedy. The moral of this case, for parties as well as family law attorneys, is be conscious of your drafting – if you intend for a maintenance obligation to be statutory under Chapter 8 of the Texas Family Code, make sure the decree includes the necessary findings. Also, if you intend for contractual alimony to be enforceable via garnishment of the obligor spouse’s wages, this must also be apparent from the terms of the decree.

Congratulations to Michelle May O’Neil on a notable appellate victory for her client.

For more information on alimony in Texas read our prior blog posts:

Alimony in Texas?!? Well, sort of . . .

Alimony in Texas?!? [Part 2 of 2]

To read articles written by Michelle May O'Neil on the topic of alimony/maintenance in Texas:

Comment: Alimony Versus Maintenance

Alimony/Maintenance Enforcement by Contempt
 

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A Dallas Divorce client raised an important question this week.  She owns a small professional practice that is an S-corporation.  Her business has some cash flow that allows her to pay the business expenses and payroll, but not much extra.  Her husband requested the Dallas Divorce Judge to make the wife turn over the cash she presently had in her business to help pay the husband's marital debts.

In a Texas divorce, a judge may only award shares of corporate stock in a divorce, and may not invade the corporate assets. Moreover, a judge may not divest a spouse of separate property corporate stock and award it to the other spouse. Retained earnings (cash) of a company are a corporate asset and are not marital property, either separate or community. The fact that the corporation is a Subchapter S corporation does not determine who owns the corporation’s earnings. A corporation may, in its discretion, distribute its income to its shareholders, but it is not required to do so. Further, it cannot be compelled to do so by a divorce court that lacks jurisdiction over the corporate entity. The shareholder in a Subchapter S Corporation has no greater rights over corporate property than a shareholder in any other corporation.

See  McKnight v. Mcknight, 543 S.W.2d 863 (Tex. 1976); Thomas v. Thomas, 738 S.W.2d 342, 343 (Tex. App. – Houston [1st Dist.] 1987, writ denied).

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 The Amarillo Court of Appeals recently issued an opinion, styled In re A.S., upholding the trial court’s imposition of a geographical restriction on the child’s primary residence in a case where the mother was appointed sole managing conservator.

When parents are appointed joint managing conservators, geographical restrictions on a child’s primary residence (for example Dallas and contiguous counties) by courts are more common than not in Dallas divorce and custody cases, as well as divorce and custody cases throughout Texas. In fact, the Texas Family Code specifically provides that the court may impose a geographical restriction on a child’s residence when the parents are appointed joint managing conservators. Tex. Fam. Code §153.134(b)(1)(A). In contrast, the provision of the section Texas Family Code that provides for a sole managing conservator’s right to designate the primary residence of their child does not even reference geographical restrictions, stating instead that a sole managing conservator’s right is subject to limitation by the court. Tex. Fam. Code §151.132(1).

The Amarillo Court in In re A.S. cited the public policy of Texas, in assuring that children will have frequent and continuing contact with parents who have shown the ability to act in the best interest of their children, in support of its decision. Further, the Court noted that nothing in the Family Code prevents imposition of a geographical restriction in cases where one parent is appointed sole managing conservator.

This is an important case to keep in mind if you are a parent who may be appointed possessory conservator, or if you are an attorney representing the party who may be appointed a possessory conservator. Cite to the argument provided in In re A.S., and ask the court to impose a geographical restriction on the child’s residence. If you are the sole managing conservator, or the Texas custody attorney representing them, be prepared to address this issue if you wish to have the freedom to move wherever you choose with your child.

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Last Friday, November 12, 2009, its opinion styled In re Cooper, No. 05-09-00995-CV, the Dallas Court of Appeals conditionally granted wife's petition for mandamus relief, holding the trial judge abused her discretion by imposing a residency residency restriction pending final trial in a divorce case that  required wife, temporary primary conservator of the parties two children, to relocate from North Carolina, where she had secured employment and owned a house, to Dallas and contiguous counties, where she had neither.

In Cooper, wife testified at the hearing on her motion to modify agreed temporary orders, that she had applied for jobs in Dallas with schedules that would allow for her to spend time with her children, but was unsuccessful. Wife ultimately accepted the only position she was offered, which was in North Carolina. The trial judge did not consider wife's efforts at procuring employment in Dallas successful, denying wife's request to modify agreed temporary orders, which interestingly allowed wife to reside in South Carolina with the children pending completion of her residency program, because she failed to establish that she made "extreme efforts' to find employment in the Dallas area. The trial court stated in her ruling that wife should have made Dallas a priority in her job search by "leaps and bounds" since that is where husband resided and where wife and the children had resided prior to initiation of the divorce case. Since wife failed to establish that she made sufficient efforts according to this standard, the trial judge ruled in husband's favor. Wife then filed her Petition for Writ of Mandamus, seeking relief .

The opinion from the Dallas Court of Appeals, authored by Justice Bridges, concludes that the trial judge abused her discretion by imposing a greater burden on wife than the law allows. The Court notes that no authority supports the trial court's requirement that wife make "extreme efforts" to find employment within Dallas and contiguous counties. Instead, the Court cited Lenz v. Lenz, as the correct standard, allowing for the modification of residency restrictions to allow the custodial parent to relocate when the proposed relocation will significantly improve the custodial parent's economic circumstances to the child's benefit. Lenz v. Lenz, 79 S.W.3d 10, 17 (Tex. 2002). The Court further found wife had no adequate remedy at law since compliance with the trial court's temporary orders required her to choose between custody of her children and financial ruin. Therefore, wife's petition for writ of mandamus was granted.

This case is relevant to lawyers that practice in Dallas county, and other areas of Texas as well. With the current state of the economy, at Dallas Divorce Law, either our clients or the opposing party is often in a position where they are forced to search for other employment in Dallas county and beyond. People frequently relocate to other counties or states for their current job or to find a new one. When modifying a residency restriction, either before the final trial in temporary orders or in a modification proceeding, focus on the Lenz factors in making your case for relocation and keep the Cooper opinion in mind.

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This week I received a phone call from Meredith Manning with CBS11 in Dallas, asking to interview me for a story related to the effect of Facebook and other social media on divorce.  She found me through my prior blog posts on the subject.  Of course, I was honored to be interviewed.  We discussed the impact that social media has had on litigation in general and family law/divorce cases specifically.  She continues to seek a spouse whose divorce was impacted by facebook -- if you know anyone like that who would agree to be interviewed (with identity concealed), let me know.  The story should air in a couple of weeks.

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