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Characterization of Property During Texas Divorce and Failure to Request Findings

briefcaseA recent Texas appeal concerned property division in a divorce. The case arose when a couple got married in 2004 and then separated in 2011. The wife filed for divorce in 2013, and the husband countersued, alleging fraud, breach of fiduciary duty, conspiracy, and other claims against the wife, some business entities, and the wife’s three adult daughters.

Certain business entities were operated by both the husband and the wife. However, the husband claimed that some of the other business entities were created by the wife in the name of her daughters, using community funds, in order to defraud the community estate.

The daughter asked for summary judgment before trial, and this motion was granted. After a bench trial, the court entered a final divorce decree dividing the marital estate between the parties. The wife appealed. She argued that the husband had been awarded a disproportionate share of the marital estate and that this was an abuse of discretion.

The wife argued that the husband got a disproportionate share of the community estate. The husband responded it was not disproportionate, but even if it were, the record supported it because the wife had withheld certain information about assets. The appellate court explained that the final divorce decree didn’t show whether the awards to the spouses were equal or disproportionate. Instead, it simply stated that the division was just and showed that the husband’s request for reimbursement for the community’s payment of the wife’s separate property taxes and the like was granted.

The appellate court explained the record didn’t include findings to show which values were assigned to the community assets and liabilities, or even the husband’s reimbursement claims. It didn’t state the percentage of the marital estate received by each party. The appellate court explained that since there were no factual findings on these points, it wasn’t possible to determine there was an abuse of discretion. The wife should have requested findings of fact from the trial court.

The wife also argued that the trial court had made a mistake in classifying her three life insurance policies and businesses as community property instead of separate property. The appellate court explained that under Texas family Code section 3.001, separate property is property owned by a spouse before marrying or acquired by gift, descent, or devise during the marriage. Personal injury recovery is also separate property. Community property includes all property gotten by either spouse during the marriage that isn’t considered separate property. The presumption is that any property a spouse possesses at divorce is community property, and to have it categorized as separate property, a spouse will need to prove it is separate property by using clear and convincing evidence.

The appellate court explained that a mistaken characterization of property has to be so huge it materially affects the fair division of property in order to obtain a reversal. The wife argued that she’d opened the life insurance policies in the name of her minor daughters before marrying, and she was the beneficiary. The business entities were created in the name of her adult daughters during the marriage.

The husband argued that the policies were paid with community funds, and the businesses were also created with community funds. The appellate court explained that even if a mistake was made in classifying these assets, the wife hadn’t shown an error that materially affected the property division because she’d failed to get factual findings from the lower court. For these and other reasons, the lower court’s judgment was affirmed.

If your divorce involves matters related to property distribution, contact the Texas attorneys at the McClure Law Group at 214.692.8200.

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