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Valuation of Separate Property and Reimbursement in a Texas Divorce

crack in rockIn Maher v. Maher, a husband challenged the court’s final divorce decree. He argued, among other things, that the trial court had mischaracterized and misvalued certain assets of the marital estate. The wife had sought the divorce on the grounds that they had discord or personality conflicts. She asked for a division of community property, confirmation of her separate property, reimbursement, and attorneys’ fees. The husband asked for a division of community property in which he received a disproportionate share, confirmation of his separate property, reimbursement, and attorneys’ fees.

The matter went to trial. The wife testified they had a son who was over 18 years old. The couple didn’t have a close marital relationship, and the wife claimed the husband’s drinking threatened their relationship. In 1995, her parents started giving her monetary gifts, and when her mother died, she became the beneficiary of a bypass trust that her mother created.

When her father died, she received distributions from his estate too. From her parents, she’d received over $1.2 million, which she claimed was separate property. She also explained that they’d given her husband monetary gifts of about $68,000, which she said was his separate property.

When the couple moved to Texas, their community property funds were over $1.38 million. They bought land from the wife’s father for $35,000, which was paid from their joint account. The wife had previously transferred money into the joint account from her separate bank account and trust gifts. The couple built a toolshed and garage on the land, and they planned to build a house in 2006 with a budget of $800,000. The husband was to be in charge of construction. The couple bought 22 more acres, using both community property and the wife’s separate property.

The wife later testified that in developing the property, they spent $1,685,887.97, made up of community property as well as separate property funds from both of them. In 2011, an appraiser valued the property at $850,000. The wife also testified that since the couple’s separation, she paid for the taxes and bills and took care of the property, using her separate property. As a result, she wanted reimbursement of $1,266,315.96 for enhancements to the property value and certain real estate tax expenses. She admitted she’d started a relationship with someone else after her husband and she had separated but before their divorce.

According to the husband, all the wife had contributed from her separate property was $434,404, and he’d contributed $68,000 from his separate property. He claimed the community property contribution was about $1,250,000. He claimed a disproportionate share of the marital estate on the ground of adultery. The real estate appraiser hired by the husband claimed the property value as of 2012 was $1,200,000.

The trial court ordered a divorce on the ground of insupportability. It made awards of assets to each spouse and rendered a judgment against the husband in the amount of $16,994.35. It found that the wife was entitled to an equitable reimbursement of $813,988.71, which could be satisfied by awarding her the real property.

The appellate court considered whether there had been an abuse of discretion with regard to the property and reimbursement issues raised by the husband. The husband argued that the wife had failed to provide sufficient evidence to prove by clear and convincing evidence that the property she claimed was separate property under Texas Family Code §3.001(2).

The appellate court explained that merely claiming property is separate property is insufficient without tracing. Tracing is required to establish that the origin of property has an origin in separate funds, based on how and when a spouse originally came to possess it. In this case, the wife had established her separate property was made up of gifts from her parents and disbursements of her mother’s trust and her father’s estate. She’d submitted a tracing spreadsheet that showed the dates of these gifts, disbursements, and distributions. The court found this was clear and convincing evidence.

The appellate court overruled the husband’s other issues as well and affirmed the lower court’s judgment.

If you are considering divorce and are concerned about the possibility of unequal property division, contact the Texas attorneys at the McClure Law Group at 214.692.8200.

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Divorce and Taxes – What to do if your ex-spouse botched your joint tax return, May 31, 2016