When a court divides property in a Texas divorce, it presumes all property possessed by either spouse during the marriage or upon the divorce is community property. Community property is all property acquired by other spouse during the marriage, other than separate property. Separate property is either property owned or claimed by the spouse before the marriage or acquired by one spouse during the marriage by gift, devise, or descent. Personal injury recoveries are separate property, but the community estate may recover for medical expenses , lost earning capacity, and other expenses the community estate incurred due to the injury. The spouse asserting that the property is separate has the burden of showing which part of the settlement is separate property. Language in a settlement agreement identifying the basis for the payment may displace the presumption of community property and create a new presumption that the funds are separate property. In such cases, the spouse claiming the property is community property must provide evidence to rebut the presumption that it is separate.
A husband recently challenged the trial court’s property division, partly because it denied his reimbursement claim related to funds from a settlement. He had settled a discrimination claim against his employer during the marriage. The settlement included mental anguish, pain and suffering, and physical injuries, but did not include back pay or front pay. He agreed to resign as part of the settlement. He deposited the funds into a savings account.
Funds from the savings account were used to make a down payment on the couple’s home, the monthly mortgage, and the final payment. The mortgage was in the husband’s name, but the deed was in both names.
The trial court awarded the house and household furnishings to the husband. The husband argued the house was bought with his separate property and he should be reimbursed. The court did not award him that reimbursement, and in fact awarded the wife $160,000 and granted her an owelty lien on the property. The court also awarded her a disproportionate share of the community estate. The husband appealed.
He argued that the trial court erred by not awarding him reimbursement for the payments for the home that were made with his separate property. A party asserting property is separate must present clear and convincing evidence to overcome the presumption that the property is part of the community estate. The party generally must be able to trace the property and present evidence of how and when it was obtained.
The husband argued the funds received for pain and anguish were separate property. He argued that the language in the settlement agreement made clear that it did not include lost wages and instead was for mental anguish, pain and suffering, and similar injuries.
The appeals court noted that the settlement agreement also included a confidentiality provision. The trial court cited the language in the confidentiality provision stating the settlement agreement could not be used as evidence in any proceeding other than one between the parties to the agreement. The trial court therefore found that the other language in the settlement could not be used as evidence, and the appeals court agreed. The husband therefore did not raise the presumption that the property was separate and still had to overcome the presumption that it was community property.
There was a statement from the bank showing that the net amount of the settlement was deposited, but the husband did not testify or present other evidence showing when the account was opened, how much was in the account when the couple married, or the other deposits and withdrawals. The appeals court found he failed to trace the funds used to pay for the home back to separate property.
The appeals court found the trial court had not abused its discretion in denying the husband’s reimbursement claim. Although the husband raised several other issues, the appeals court overruled them all and affirmed the trial court.
In this case, it appears the funds in question were of a type that is generally separate property. The settlement agreement identified the claims being settled, and they all would have resulted in separate property. However, due to the confidentiality provision of the settlement agreement, the court would not consider it. The issue here was not that the husband was wrong in characterizing the property as separate, but that he was unable to prove he was correct. If you are facing a high asset divorce, the experienced Texas divorce attorneys at McClure Law Group can help you identify the proof you need to support your case. Please call 214.692.8200 for a consultation.
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