304 Harwood Road Bedford Texas 76021
||Texas Community Property FAQ
1) What is community property?
Texas law defines community property acquired other than by gift or inheritance
during the marriage. Separate property is defined as anything acquired
by a spouse before the marriage, or during the marriage by gift, devise
or bequest. The law requires that the community estate be in a just and
fair manner. This does not necessarily mean equally. The court can
give an inequitable division of the property based on a number of factors
such a length of the marriage, difference in earning capacities, fault in
the break up of the marriage.
2) Can I get a portion of my spouse's pension and employment benefits?
To the extent that a married person accumulates an interest in a pension,
retirement, profit sharing or other employee benefit plan during the marriage,
it is community and subject to division in the Dissolution of Marriage.
The law gives the judge the power to award a spouse his or her pension
plan, based on its "present value," or to award each spouse a proportionate
share of the benefits when they are paid.
3) How are pension plans divided in a dissolution case?
Generally, Pension Plans are divided in one of two ways: a "when received"
or a "cash-out."
This is the most common way in which Pension Plans are handled. The
court orders that when the employed spouse retire the other spouse will
receive a percentage of each pension check. This percentage is calculated
by dividing the years when the spouses lived together as husband and wife
by the total number of years that the employed spouse has been participating
in the Pension Plan. The result of that division is the community property
percentage of the Pension Plan.
For example, if the husband had 20 years of contributions into a Pension
Plan, with 10 of those years coinciding with the years he lived with his
wife, the community property share of his Pension Plan would be 50% (10
divided by 20). Thus, the wife would be entitled to 25% of the husband's
pension checks (½ of 50%).
The spouse can elect to receive his or her share of the employed spouse's
pension benefits at the earliest time that the employed spouse could retire.
The Federal Retirement Equity Act of 1984 created what is known as the
"Qualified Domestic Relations Order," or "Q.D.R.O." (pronounced "quadro").
Where the Court makes orders concerning a spouse's retirement plan and
the order is prepared in the correct form, the Federal law requires the
employer to comply with the terms of the order. The preparation of a Q.D.R.O.
can be time consuming and complicated, and, consequently, expensive. However,
it is a necessary step in the dissolution process.
The other method of dealing with Pension Plans involves obtaining "actuarial
evaluation" of a Pension Plan. An actuary is an expert who deals with statistical
and financial evaluations of insurance policies, annuities and Pension
Plans. By reviewing the Plan description as well as the accumulations on
the account of the employed spouse, the actuary can determine the "present
value" of the Pension Plan.
For example, if the husband's Pension Plan provides that he will receive
$1,000 per month upon his retirement at age 65, and the husband is presently
45 years old, the actuary estimates how much money would have to be deposited
in an interest-bearing account now to yield interest income in 20 years
of $1,000 per month. This process includes an estimation of the long-range
interest rates that would be in effect over that period of time. Actuarial
evaluations of Pension Plans commonly cost $100, which is an expense that
has to be paid by our clients.
With a cash-out, the employed spouse receives his or her Pension Plan,
with other community property assets being awarded to his or her spouse
to result in an over all equal division of community property.
4) How do the courts deal with a closely-held business or professional
Like any other asset, a business or professional practice must be considered
in the valuation and division of community property. To the extent that
a business or practice has been developed during the marriage, there is
a community property interest that must be dealt with in the dissolution.
Certified public accountant and business appraisers are hired to determine
the value of a business or professional practice. The accountant or appraiser
who is hired reviews the books and records of the business or practice
and prepares a written report.
Valuation of a business for divorce purposes is not the same as valuing it for
sale because a person personal goodwill is not divisible by the court and must
be excluded from the calculation.
5) How do courts handle the family residence?
Where minor children are involved, it is common for the custodial parent
to be allowed to live in the residence with the children for a specified
period of time after the divorce is finalized. During that period of time,
the spouse who lives in the home is usually required to make all mortgage,
property tax and homeowner insurance payments when due. The house must
be sold when: there are no children living at the property, the youngest
child attains the age of majority, or any date as otherwise agreed by the
parties or specified by the court.
6) How do the courts handle educational degrees and professional licenses
acquired during the marriage?
Texas does not give the other spouse any
consideration for the enhanced earning ability of the spouse who acquired the
degree or license.
This page last updated 12/7/12
article was adapted from the work of California attorney, Glenn
Rabenn, whose permission to do so is greatly appreciated.