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TX divorce lawyerWhen couples get divorced, one issue that they will need to deal with is how to divide the property they own. In some cases, this may involve complex property litigation, especially if a couple has a high net worth or owns complex assets. One issue that can complicate this process is distinguishing between community property and separate property. In some cases, these forms of property can become commingled, making it difficult to determine what types of property should or should not be divided between the spouses.

Examples of Commingled Property

Community property includes all property or assets that either spouse acquired while the couple was married, while separate property includes property the spouses owned before they were married, as well as assets received by a spouse as a gift or inheritance. Separate property can become combined with community property in a variety of ways, including:

  • A spouse may own a house before they were married, but during the couple’s marriage, both of the spouses may have contributed to ongoing mortgage payments or improvements, maintenance, or repairs to the home. During divorce, the house may still be considered the separate property of the spouse who originally owned it, but the other spouse may be reimbursed for their contributions to the equity in the house or the improvements that caused the house to increase in value.
  • A spouse may receive an inheritance during the couple’s marriage, and this amount may be deposited into a joint bank account, with both spouses making additional deposits to and withdrawals from the account during the marriage. Under Texas law, it is presumed that community funds are withdrawn from joint accounts before separate funds, so if the balance of the account is higher than the amount of the inheritance, the inherited funds will be considered separate property. If the balance of the account is less than the amount inherited, the spouse who received the inheritance may retain ownership of the full balance.
  • A spouse may use funds or other assets owned before getting married to make investments, and money earned from these investments may be reinvested or used in other ways during the couple’s marriage. Distinguishing between community property and separate property may be complex in these cases since dividends earned during the marriage will usually be considered community property. To determine what portion of these assets are considered separate property, it will be necessary to trace assets back to their source and demonstrate that they originated from separate property.

Contact Our Austin, TX High Net Worth Divorce Attorneys

If you own complex assets or have a high net worth, determining how to divide property with your spouse during your divorce may be a complex undertaking. At Powers and Kerr, PLLC, our attorneys can help you understand how Texas law applies to your community property and separate property, and we will make sure these matters are addressed properly during your case. Contact our Austin property division lawyers today by calling 512-610-6199.

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TX high asset divorce lawyerWhile the art scene in Austin is not quite like the art scenes in New York or London, many Austin residents have large collections of valuable artwork, including sculptures, paintings, and other art objects. Many married couples in Austin collect art together, and their homes are filled with their collection. In the event such a married couple decides to get divorced, the matter of the art collection can become extremely contentious. Dividing an art collection can be quite a battle, especially when the parties do not want to see the collection divided at all. To be sure, many people who collect art feel that the collection is priceless and do not want to see any of it sold or distributed. Yet in a high asset divorce in Austin, all community property will need to be distributed between the spouses. And while the parties may personally believe that the collection is priceless, it is possible to place a market value on almost any work of art for the purposes of dividing it in a divorce. Let our Texas high asset divorce lawyers tell you more about dividing art collections in a Texas divorce.

Recognize That the Whole Collection May Be Community Property

As you may know, Texas is a community property state. What does this mean for a high asset divorce and an expensive art collection? Under Texas law, nearly all property (aside from a few exceptions) acquired after the date of the marriage is classified as “community property.” In a Texas divorce, all community property is divided between the spouses. For many married couples in Austin who have been collecting art for years or even decades, most if not all of the collection is likely to be classified as community property and will be divided as part of the divorce.

Determine the Date of Purchase and Other Documentation

If you believe that one or more pieces in the art collection are not community property, you will need to get documentation to prove it. If you purchased the painting prior to the marriage, it is important to find any receipts you have for the piece. Even if you cannot locate a receipt, it may be possible to work with your Austin divorce attorney to gather evidence that proves the painting was in your possession long before you got married and that, accordingly, it should not be part of the division of community property.

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TX divorce lawyerWhen you are thinking about the financial issues and economic realities of a high asset divorce in Austin, Texas, one of the things you may be considering is whether it makes sense to stay in your marital home or to sell the property and share the profits. First, you will need to determine whether the home is likely to be classified as community property. If so, it is important to consider all factors in determining whether it makes sense to keep the property. Our Austin high asset divorce lawyers will say more about the complications of keeping a marital home after a high asset divorce.

Is the Marital Home Community Property?

Before you start to consider whether it could make sense to negotiate a property settlement in which you keep the house, you will need to know first whether the house is even likely to be classified as community property.

As you likely know, Texas is a community property state. Accordingly, under Texas law, courts divide community property (or property of the marriage) between the spouses, while usually, separate property is not divided. For many Austin couples, the marital home is considered community property or, at least, part of the value of the home is community property. While a number of Texas couples purchase a home together after they are married, there are a variety of ways that a marital home may have characteristics of both community property and separate property. For example, if a couple uses separate funds to place a down payment on the house but makes mortgage payments from community funds, commingling has occurred and the types of property will need to be traced out.

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TX high asset divorcePlanning for a divorce is complex no matter what kind of property you own with your spouse. To be sure, even when a couple owns relatively few assets and has a limited amount of debt that will be classified as community property under Texas law, accurately identifying and valuing property can still be complicated. Yet these processes are significantly more difficult and complex in a high asset divorce. And it is not just increased complexity surrounding the division of community property that can make a high asset divorce different. In addition to the division of community property, maintenance or alimony can also have significant implications for your taxes.

Our Texas high asset divorce lawyers want to help. The following are a few key ways that a high net worth divorce is different from other divorces.

More Money Means the Stakes Are Higher

While there is no set monetary figure to define a high asset or high net worth divorce, we typically use this term to talk about divorces in which the couple has $1 million or more in assets. Austin is a city where married couples have family roots for generations while also being a place where musicians and artists have decided to live. Accordingly, there are many married couples in and around the Austin area who might qualify for a high asset divorce. When a divorce involves millions of dollars, the stakes are simply higher.

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TX divorce lawyerWhile very few of us ever get married with the intention of later filing for divorce, Texas residents file for divorce more often than you might expect. Making plans in the event of divorce are important for Austin residents of all income levels, but planning is particularly important for wealthy Texans and high earners. We want to discuss some tips for preparing for a high net worth divorce in Austin at multiple points in time—from the time of your marriage to the moments shortly after filing for divorce. If you need assistance with your divorce, an experienced Austin high asset divorce lawyer can help.

1. Sign a Prenuptial Agreement

Under the Texas Family Code, two people who are planning to get married can enter into a prenuptial (or premarital) agreement. While prenuptial agreements are helpful for people at all income levels, they are particularly necessary for individuals who are high earners or would anticipate a high asset divorce in the event the marriage does not last. In a prenuptial agreement, the parties can reach an agreement about how certain assets will be divided or distributed in the event of divorce.

2. Avoid Commingling Separate and Community Property

Avoid commingling separate property and community property wherever possible. In other words, any property you acquired before the marriage, or any property acquired through gift or inheritance during the marriage, should be kept separate. Do not use those assets to contribute to community property, such as investing separate property into a community property account or by using separate assets to improve the marital home.

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TX divorce attorneyWhen you are going through a high asset divorce in Texas, the prospect of dividing valuable collections in your divorce can be devastating. Married couples in the Austin area often acquire many different types of collections that they consider to be priceless, from paintings and sculptures to rare vinyl records and books. Given that one of the points of the collection is to keep it intact, it can be extremely difficult to consider having a collection pieced apart and sold because you are getting divorced. The following are some important considerations for dividing a rare book collection in a high net worth divorce, including possibilities for keeping the collection intact.

Know How Property is Divided Under Texas Law

Texas is a community property state. As a community property state, any property that spouses acquire during their marriage is owned jointly by them as “community property.” Generally speaking, Texas courts will divide community property equally between the spouses recognizing that both have equal interests in the property. However, courts ultimately divide property in a manner that is equitable to both parties, or “just and right,” given their particular circumstances.

If you acquired any part of the rare book collection after the date of marriage, it will likely be classified as community property and subject to division. Exceptions may include a rare book inherited by one of the spouses during the marriage or a gift given only to one of the spouses during the marriage. Any part of the collection acquired prior to the date of marriage usually will be classified as separate property and will not be divided.

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TX high asset divorce lawyerAlthough divorce can be an emotional rollercoaster for the parties involved, proceedings can become especially contentious when there are disputes about ownership of significant, unique, or valuable assets. While prenuptial agreements can help clear up these disagreements, many couples fail to enter into these types of contracts, as they deem it unlucky to contemplate the end of a marriage before it actually begins. For help protecting your property during your divorce, please contact our experienced Texas high asset divorce legal team today.

Accounting for All Assets

One of the biggest mistakes that a divorcing couple can make is to fail to account for all of their assets, including:

  • Current bank accounts
  • Non-cash assets
  • Future interests, such as pensions, start-up stock options, and business interests
  • Inherited funds or goods
  • Income earned prior to the divorce filing, but received later, including bonuses and recent paycheck retirement contributions

Identifying all of these types of assets can be difficult, especially for those who do not play an active role in managing their household finances, so it is particularly important for those who find themselves in this position, to speak with an experienced forensic accountant before proceeding with the property division process.

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TX divorce lawyerMany people know that dividing up marital assets is one of the most difficult aspects of divorce, as appraising and determining who will retain which assets is a complicated process. However, few couples realize that one of the most complex aspects of the property division process is actually having to account for the tax implications of retaining or transferring certain types of property. To learn more about the tax-related issues that you should take into consideration during your own divorce, please contact an experienced high asset divorce attorney who can advise you.

Tax-Free Transfers

Couples who have filed for divorce and are in the middle of the property division process should remember that only property transfers that are made within one year after the dissolution of a marriage are considered income tax-free. No deductible loss or taxable gain can be declared during this time period, although once a year has passed, any transfers made by either party can be evaluated by the IRS.

Alimony Payments

Under recent changes made to the U.S. tax code, alimony payments will no longer be tax-deductible for the payer and will also no longer qualify as taxable income for the recipient. For these reasons, couples who are in the midst of a divorce should think carefully when negotiating a settlement involving alimony payments.

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