Finding Hidden Assets in a Divorce

By | Community Property, Divorce, Just and Right, Marital Property Division, Separate Property

In order to effect a just and right distribution of the martial assets, it necessarily follows that the first step is to find all the assets and debts. A divorce lawsuit has the same tools any other commercial lawsuit would have when it comes to finding assets belonging to your spouse or to the community.

There are four basic tools to finding assets: inventories, written discovery, oral discovery and third party discovery.

Each party typically discloses assets and liabilities in an inventory which commonly initiates the exchange of financial information. Inventories list common assets such as real estate, securities, an other interests as well as debts such as mortgages, credit cards and personal loans. They are typically filled out by each party under oath and then exchanged between the parties or their attorneys.

Written discovery is a useful tool for seeking more detailed information regarding assets and debts. Written discovery is comprised of interrogatory requests, production requests, requests for admission and requests for disclosure.

Interrogatories are questions asked of opposing parties that require answers under oath. For example a common interrogatory is, “Please list each and every bank account in which you or your spouse owns an interest.” The responding party is obligated to disclose each bank account in response to this question.

Requests for production often seek corresponding documents to interrogatory responses. For example, a common request for production is, “Please produce bank statements for the preceding 3 years from each account your claim separate property is held.” Requests for production can also include a request for inspection, which could be used to inspect a hard drive or books and records.

Requests for admissions are questions that would typically require a yes or no answer. Although not as popular as other requests, they can be valuable in narrowing the issues. An example of a request for admission is, “Admit or deny that the account ending in 123 is comprised of separate property funds belonging to wife.”

A request for disclosure is a standard set of requests that seek information regarding parties with knowledge of relevant facts, the amount in controversy as well as identification of experts among other essential issues in every lawsuit.

In deserving situations, phones and computers could be required to be produced to conduct forensic discovery on the hard drive. Electronic discovery is expensive as is any other situation in which an expert is needed to analyze data. In more and more situations, the expense is justified.

Discovery is permitted from third parties just as it is from parties in the case and is especially valuable if a party is not forthcoming in the discovery process. For example, the power of subpoena can require a bank, employer, partnership or any entity or person with information pertaining to the debts and assets in a case to produce documents or sit for a deposition.

Oral discovery a/k/a deposition discovery can be used to elicit testimony from a party or any other person or entity that may have information pertaining to the proceedings. A deposition is similar to the questioning one might have at trial except that it is typically performed in an attorney’s office, in front of a court reporter and or videographer. The testimony is still under oath the same as if it was in front of the court and can be used as evidence at trial. A deposition could be used in situations where interrogatories are not sufficient for determining the factual complexities of the issues. For example, if a spouse has a complicated partnership interest and more information is needed to explain partnership documents, a party can take the partner’s deposition to resolve the complexities.

What can a pre-marital agreement do for me?

By | Community Property, Divorce, Marital Property Division, Pre-Marital Agreements, Separate Property

I can’t resist commenting on the recent drama with Weiner, Schwarzenegger and Edwards. Could a carefully crafted pre-martial agreement have reduced the likely fallout? Pre-marital agreements, by definition, prepare for the unexpected. No one ever thinks they will divorce when they get married. But most intelligent people know life is hard and it’s reasonable to expect the unexpected. Whether or not “love children” are reasonable to expect is a different question.

Without a pre-marital agreement, Texas courts typically order a fifty-fifty community property division. Fifty-fifty seems presumptively fair except no two divorces are alike and often times people make disproportionate amounts of money, incur different amounts of debt and make different career sacrifices for their family. And sometimes a spouse has independently caused the break-up of the marriage. I’ve heard rumors that Michael Douglas and Katherine Zeta-Jones have a pre-marital agreement that provides for a disproportionate share of their estate to be awarded in the event of infidelity.

With the rise of second marriages and children having more than one parent, it seems that pre-marital agreements should be standard and not just divorce planning for the rich. If your career suffers so that you can raise your spouse’s children, is your spouse going to provide for your children in their will? If your spouse has a significant amount of separate property and you are married for twenty years, shouldn’t some of that separate property be re-characterized as community property? If you and your spouse have agreed to go to counseling before filing for divorce, why not put that in writing?

There are so many options for tailoring a pre-martial agreement to you and your spouse’s specific needs. The only major exception is that you cannot eliminate the need for child support in a pre-marital agreement. Otherwise, if you and your fiancé have any important agreements on how your marriage will function, consider speaking with your attorney about a pre-marital agreement.

5 Factors Affecting the “Just and Right” Distribution

By | Community Property, Just and Right, Marital Property Division, Separate Property

A court’s guiding principle in dividing community property in a divorce is based upon the “just and right” standard. Although each spouse has an equal interest in community property, the division won’t necessarily be fifty-fifty. Here is a list of 5 factors that can affect the court’s award of community property.

1. Who has the children? Do the children have particular or expensive needs that would justify awarding one spouse more property due to the increased need at home?

2. Education and Employability? Will one spouse have to start over because he put the other through graduate school while neglecting his own career?

3. Separate Property? If one spouse inherited enough for a lifetime, a court could award the other spouse a disproportionate share of the community.

4. Fraud. If a spouse lent money to his girlfriend during the marriage, an argument could be made that he is entitled to less because of the fraud.

5. Age. Is one spouse going to live a lot longer? Maybe Ashton Kutcher could make the argument that he will live longer and need more assets.

General Separate and Community Property Concepts

By | Community Property, Just and Right, Marital Property Division, Separate Property

The difference between community and separate property is too complex and multifaceted to explain in one article. The purpose of this article is to summarize the general concepts regarding marital property and to address some common misunderstandings.

The reason why it’s important to have a good general understanding of marital property issues is because community property can be divided up by a divorce court while separate property can not. As a side note, community property will be divided in a “just and right” manner which is not necessarily a fifty-fifty split.

The general rule in Texas (with exceptions) is all property is community property except property acquired before marriage, inherited property or gifts. Easy enough to say the furniture you bought while you were single is your separate property and the house you bought after marriage is community property. But what if you owned a house before marriage and rented it out during marriage? Would you say the rent was community property or separate property?

The answer is the house is separate property but the rental income is community property. This rule is generally true for all property that produced income or a profit except for (among other types) oil and gas well royalty which remains separate.

Other things to keep in mind are assets that are made up of both community and separate property, such as bank accounts and 401ks owned before and during the marriage. The separate property amounts are not commingled to the point of non-existence, but it can be difficult to prove their separate character.

For example, if your bank account balance is $100,000 on the date of divorce, the court will consider all of it community property unless you can “trace” through admissible evidence that the balance before marriage was $60,000. This is most commonly done through showing detailed account records which sounds easy but can be difficult for spouses who have been married for decades. If the property can’t be traced, then the $100,000 will be divided up by the court whereas, if the $60,000 can be traced by “clear and convincing” evidence, then the court will only divide up $40,000 of the bank account.

Again, whole treatises and libraries have been dedicated to this subject. This article is intended to generally summarize some basic Texas marital property concepts. If the article makes you wonder about your situation, please don’t hesitate to contact me to discuss it further.