Jeff Landers, the author of the new book, Divorce: Think Financially, Not Emotionally – What Women Need To Know About Securing Their Financial Future Before, During, And After Divorce, wrote an interesting article for Forbes.com regarding asset division during divorce.
The focus of the article centered on women preparing themselves and their finances during the divorce process and to become educated on what assets they are entitled to at the conclusion of the divorce. The biggest mistake I see either spouse make during the divorce process, not necessarily just women, is to rely upon the representations made by the other spouse when it comes to what a person is entitled to when dividing property.
Texas is a community property state. This means that everything a person owns at the time of divorce is presumed to be community property and is thus divisible by a Court. However, if a person can prove that an asset is their separate property, the Court cannot divide that asset and will award it to the person whose property is characterized as separate. A piece of property can be separate property in Texas if it was 1) owned prior to marriage 2) inherited either prior to or during the marriage 3) was gifted to a person during the marriage or 4) is a personal injury award for pain and suffering. It is important that you consider these factors when you are meeting with your attorney to discuss your options and how you are going to prove an asset is your separate property.
Many types of assets can be what are called “mixed character assets” meaning that the asset can be made up of both community and separate property. The most common example of this type of asset is a stock option. For instance, a stock option can be awarded to a spouse by their employer during the marriage but the stock option will not fully vest until after the divorce. The stock option has both a community property and separate property aspect. The employee’s continued work after divorce is required in order for the option to vest and this continued work after divorce is considered the spouse’s separate property. Therefore, the community property portion of the stock option needs to be assigned and then divided at the time of divorce.
Education and preparation is necessary when preparing for and going through the divorce action. Your divorce attorney is your guide and advisor during this process. However, the more you know, the more successful of an outcome you will have.