Articles Posted in Property

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In a recent Texas Supreme Court case, the Court considered a mediated settlement agreement related to a discretionary employee bonus. The issue was whether the agreement partitioned a discretionary employee bonus that the husband got nine months after the divorce was granted. The husband argued that it was future income and earnings that the agreement partitioned to him, but the wife argued it was earned during the marriage and should be considered undivided community property.

The couple in question married in 1980. The husband worked at an energy and commodity trading company starting in 1992. As part of his employment, he was eligible for an annual discretionary bonus. This wasn’t guaranteed but would be awarded based on performance. While married, he got a bonus every year.

The wife sued for divorce in 2008, and the couple agreed to divide $10 million of community assets with $5 million to each spouse. However, since they couldn’t resolve other differences, they entered into mediation from which they developed a mediated settlement agreement. This agreement partitioned other property, including retirement plans and jewelry. The husband claimed that the bonus he’d gotten in 2010 before the finalizing of the mediation settlement agreement went into an account awarded to his wife.

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statueIn a recent Texas appellate decision, a wife appealed from an order that denied her petition to enforce and to clarify the divorce order. The husband and wife had divorced in 1990 and stipulated to the divorce decree. At that time, the husband had retired from the United States Army and got retirement pay on a monthly basis. The divorce decree determined that the community interest in the monthly retirement benefit was 80%, and the cost of living-related increases would be made periodically and would likely need to occur in the future.

The wife was awarded a portion of the retirement benefit. The wife was entitled to 50% of the cost-of-living increases (COLA) to which the husband would become entitled from the date of the divorce to the death of the husband. In 2000, the wife asked the court to clarify the divorce decree and enforce her part of the COLA.

The judge decided she was entitled to $774.02 as her portion of COLA benefits that hadn’t already been paid by the husband. She appealed. The referring court adopted the judge’s finding that she could get clarification of the divorce decree and that she should be given 50% of the COLA benefits. It reversed the exact amount that should be awarded. Specifically, it ordered that she would be entitled to $391 each month of the retirement pay plus half of any COLAs when they were received. She was awarded $7,628 for all of the past COLA payments that the ex-husband had not paid. Nobody appealed this award.

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wedding ringIn a recent case, a Texas appellate court considered a motion by an ex-wife to compel her former husband to produce financial records. The husband petitioned for divorce from the wife in 2008. He was employed by a limited liability company and also participated in other limited liability partnerships with his employer, from which he received income.

During the divorce, the court addressed how the husband’s interest and income derived from the limited liability partnerships would be divided. Both parties submitted their proposed divisions to the court. The court divided the marital estate in 2009 and adopted the husband’s proposed division. This gave the wife more than $3.2 million and other property, as well as 50% of the estimated income from one limited liability partnership for 2008.

The husband got the entire interest in both limited liability partnerships other than what was expressly awarded to the wife. The appellate court affirmed the divorce decree and found that the wife was estopped from challenging the division on appeal because she’d accepted the benefits of the property division. There was further litigation about the income from the partnerships, as well as other post-divorce litigation to modify various aspects of the judgment.

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One of the best ways to protect your assets during marriage is to enter into a premarital agreement (also known as a prenuptial agreement or prenup) prior to getting married that details all the assets and liabilities of both parties prior to marriage and details each party’s rights and obligations to the other’s income earned during marriage.

You might be thinking that a premarital agreement may cause strain on the marriage before it even begins so you instead plan to protect your assets by setting up separate bank accounts for your separate property and ensuring no community assets are ever commingled into the account during marriage. While this may seem like a suitable alternative, these measures may be insufficient to protect your fortune. Since interest accrued during the marriage, salary earned during the marriage, and cash dividends distributed the marriage will all be community property without a premarital agreement stating otherwise, a premarital agreement will often be necessary.

So how do you ask your fiancé to sign a premarital agreement without causing strain on the engagement? The answer lies in the actual terms of the premarital agreement. The words ‘prenuptial agreement’ are too often associated with misconceptions about one-sided deals with the non-monied spouse getting nothing. In reality, prenups are simply agreements to define the rights and obligations of couples who are about to marry. Additionally, the future spouse who is wealthier should know that the more one-sided the agreement, the more likely it is to be attacked upon divorce. As such, the wealthier future spouse has an incentive to make the agreement attractive to his or her fiancé.

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weddingIn Texas, all property possessed by either spouse at the time of divorce is presumed to be community property under Texas Family Code § 3.003. A recent appellate case arose out of the divorce of a Texas couple who had been married in Mexico in 1999. In Mexico, they got their civil marriage application, which required them to choose between two marriage property systems, separate property or community property, in order to regulate ownership of their items of property. They chose to have separate property.

In 2015, the wife sued for divorce. She asked for the community property to be divided disproportionately. The husband counterclaimed and stated that he and his wife had to have separate property. He attached a facsimile of the couple’s marriage certificate that included the agreement to have separate property during the marriage, but the certificate wasn’t signed.

At trial, an expert testified for the husband and provided the opinion that in Mexico, a marriage application is treated as a prenuptial agreement. The husband testified that the couple signed the application, but the wife testified she didn’t remember signing the application. She claimed only the husband handled the paperwork, and she didn’t even remember talking about choosing a property regime before the wedding.

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If your business partner is also your life partner, you need to consider a recent Texas high court decision. (read more)

Gonzalez v. Maggio, 500 S.W.3d 656 (Tex. App. – Austin 2016) is a Texas case that illustrates the complexities of ending a business partnership along side of ending a personal partnership. The Texas Court of Appeals reviewed how a husband and wife, who were also law partners, would divide their clients, fees, and remaining clientele.

The case arose out of a divorce in which the husband and wife had also formed a law partnership during their marriage. There was no written partnership agreement but it was undisputed that they shared in the capital, profits and losses 50/50.

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handicap signsIn the Matter of Luna and Vicente Luna considered an appeal from a final divorce decree in 2015, which was memorialized in a written decree that granted a couple’s divorce, divided their property, and provided for support and conservatorship of their adult disabled child. The couple had married in 1980 and separated in 2014. During their marriage, the father started a construction company.

By the time of the divorce, the couple disagreed about the company’s ownership. The father claimed he’d sold half of the company to his son, but he later testified the son was an employee earning $23/hr. During cross-examination, the son admitted the name certificate did not include his name until 2015, and his father had responsibility for paying payroll taxes and had authority to write checks.

At trial, the father testified the construction company had paid no federal income taxes, nor had it entered profit and loss statements into the record. The total of the evidence came from introducing banking records for the construction company for 2013, 2014, and 2015.

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roofIn the Matter of Marriage of Belcastro and Belcastro considered issues raised by an ex-husband related to the division of the community estate and debt. The case arose from a couple that had married in 2004. The wife was an Army major, assigned to bases in Texas, Iraq, and Germany. She’d been hurt while serving and had a disability rating of 90%. In 2007, she’d set up an LLC that repaired and installed roofs and renovated properties. Her husband had been in construction and roofing for his entire adult life, and he was general manager for the company.

He gave the company tools and equipment he owned before marriage. The company owned real estate and used different names. The wife wanted to increase the odds that the company would qualify for military contracts. She asked her husband to give up his marital rights in the business so that they could claim a disabled female veteran wholly owned the company.

The husband agreed and relinquished his communal marital property rights in connection with the business. The wife retired in 2012, and she moved home with her husband. The next year, she filed for divorce. They tried to reconcile but ultimately separated by the spring of 2014.

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houseTexas Family Code section 9.007(a) does not permit a trial court to modify property division that is subject to a divorce decree. In the recent Texas appellate case of Perry v. Perry, an ex-husband appealed from a post-divorce order that appointed a receiver to sell a house that was the former community property of the ex-husband and his ex-wife.

The couple had divorced in 2012. The divorce decree awarded the husband possession of the house and each of the spouses half of the sales profits. Part of the divorce decree was on a form, and the other part was added in handwriting by the divorcing couple. Specifically, the form awarded the house to the husband, while divesting the wife of her interest. However, the handwritten part gave the wife half of the profits of the sale.

Years after the couple divorced, the husband sued to enforce the decree and claimed the wife had violated it by refusing to sign a transfer deed. He asked the trial court to order her to transfer her interest to him and claimed her refusal to sign the deed kept him from selling their former home. The wife asked the court to clarify the rights and duties of the parties. She said that her ex-husband had told her he wouldn’t give her half the profits once the house was sold and asked the trial court to appoint a receiver, claiming that since there was a risk of foreclosure, it was necessary for a receiver to protect both her interest and her husband’s.

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ringsIn re Interest of HDV arose when a husband appealed a final divorce decree, arguing among other things that the trial court had erred in awarding his wife money and property under their premarital agreement. The couple had entered into the agreement, which included a provision that there would be no community property, months before their marriage in 2003. The husband obtained a judgment that it was enforceable. While married, the couple had two kids.

The wife filed for divorce in 2010, and the husband counter-petitioned. The court ordered the husband to pay the wife’s attorneys’ fees on a temporary basis. The couple agreed to a parenting trial just before the court held a bench trial on the financial issues in 2014. The parenting plan was incorporated into the decree, which affirmed that the premarital agreement was valid and that there was no community property. The court awarded the husband and the wife, respectively, all of the property that he or she possessed. It awarded the wife as separate property a 2002 car. It also ordered the husband to pay the wife an allowance of $30,000, plus $3 million.

The husband appealed, arguing that the trial court shouldn’t have awarded the wife money and property based on the premarital agreement. The premarital agreement had stated that upon death or divorce, each party would receive their separate property, and the husband would make a payment to the wife based on how long the marriage lasted. In this case, the provision about a five-year marriage applied. Based on the provision, the court calculated the husband’s net worth from the date of the filing of the divorce petition, and it accordingly found that the husband had to pay the wife $3 million.

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