Updated: The Risks of Selling Assets Prior to Divorce Without Your Spouse's Approval

 Posted on March 15, 2021 in Complex Property Litigation

UPDATE: To avoid financial issues during divorce, spouses should take care when making any major decisions about money or property, including entering into any major transactions. To ensure that marital property can be fairly divided between spouses, the parties should fully disclose all relevant financial information related to their marital assets, as well as all forms of separate property. Spouses should not sell, give away, destroy, or otherwise dispose of any physical items, financial assets, or other forms of marital property. If a spouse does so, they could face consequences as described below.

Unfortunately, when a person commits fraud against their spouse, this may lead to the loss of assets, limiting the financial resources that are available during the property division process. To prevent this, a spouse may ask the court to issue a temporary financial restraining order. This type of court order will prevent both spouses from making any major financial transactions or taking any actions that could cause financial harm to their former partner. Spouses will be permitted to make regular expenditures to cover the costs of daily life, and as they work through the divorce process, they can ensure that the majority of their marital assets will not be affected, allowing them to reach a settlement that is fair and equitable for both parties. If you believe that a temporary restraining order is needed in your divorce, or if you need to address other complex property issues, an Austin divorce lawyer can provide you with legal help and representation.

When it comes to a high asset divorce in Texas, both parties need to take care when selling or disposing of anything that might be considered marital property. In other words, do not sell all of your jewelry or expensive electronics and keep the money hidden from your estranged spouse. If you do this, a court may consider such actions “fraudulent” and penalize you when making a final division of the marital estate.

Judge Orders Ex-Wife to Repay Ex-Husband for “Constructive Fraud”

Now, selling assets that partially belong to you may not be fraudulent in the traditional sense of that word. But Texas law does consider it a “fraud on the community.” This is another way of saying one spouse breached their fiduciary duty to the other spouse.

Here is a real-world illustration of what we are talking about. In a recent Texas divorce case, a husband filed for divorce against his wife after eight years of marriage. The couple had no children. In his divorce petition, the husband alleged his wife had sold more than $50,000 worth of “household goods, furniture, and electronics” acquired during the marriage without his consent. Basically, the husband said he returned home one day to find his house “empty.” The house itself was the husband's separate property – he acquired it before the marriage – but everything else was considered community property.

The wife never appeared in court to contest the divorce. The court, therefore, entered a default judgment. The judge made an uneven division of community property to account for the wife's “constructive fraud” in selling marital assets without the husband's consent. The husband received both cars owned by the couple as well as 80 percent of his pension benefits. The judge also ordered the wife to pay the husband for his one-half share of the property that the wife sold.

Although the wife did not participate in the trial, she did file an appeal (acting as her own attorney). Before the appeals court, the wife challenged the uneven division of community property. The appeals court said the trial judge acted properly. The uncontested testimony at trial showed there was evidence the wife “committed constructive fraud on the community.” This gave the judge a “reasonable basis” for the unequal division.

Put another way, once the husband testified his wife sold marital property without his consent, the burden shifted to her to prove that she acted “fairly” in disposing of the assets. But as she never appeared or testified before the trial court, the trial court acted well within its discretion in finding the wife acted unfairly and proceeded to divide the marital estate on that basis.

Contact a Qualified Texas High Asset Divorce Lawyer Today

There are legal steps you can take to prevent your estranged spouse from selling or “dissipating” marital property without your consent. An experienced Austin high asset divorce attorney can advise you further. Contact Powers and Kerr, PLLC at 512-610-6199, today to speak with a lawyer to learn more about your options.

Source:

https://scholar.google.com/scholar_case?case=9340882862885001365