One of the most challenging and often most productive elements of representing clients who have substantial and complex assets is the proper analysis and evaluation of those assets. In many cases there is a need to evaluate and divide real estate and the debt on that property, as well as financial accounts, retirement benefits and closely held businesses. Each one of these types of assets has its own unique challenges.
Real estate may involve homesteads, raw land, commercial property, as well as mineral interests. Texas has very specific rules on how to determine if property is the separate property of one spouse or the community property of the marriage or if it is jointly owned by the separate estate and the community estate. Although property acquired before marriage by a spouse is that spouse's separate property, some property acquired after marriage can still be considered separate. Often we will see a piece of property that belongs to one estate, i.e., one spouse's separate property, but will have received contribution in the form of payments, reduction in the mortgage or improvements from the other estate. This can give rise to a claim for reimbursement to be sure that the contributing estate is fairly compensated.
Additionally, after a divorce, one party may be awarded a home or other real estate with substantial debt on which their spouse is jointly liable. In these cases, we often try to provide for refinancing the debt or have real estate documents drafted providing a measure of security to a spouse if the mortgage is not paid as required. We frequently work in conjunction with specialized real estate attorneys to accomplish these goals.
In the course of most marriages, especially longer marriages, we often see a mixing or a commingling of separate and community property. This may occur when one spouse inherits assets and mixes these with marital assets. This can also occur when one spouse brings substantial assets into the marriage that increase in value during marriage. As a general rule, the spouse claiming separate property must prove and trace it. There are well-established rules set out by the courts on tracing. To properly prepare for such a case, we may retain a forensic accountant or other expert to help prepare the evidence needed and present it to the court in a proper form.
Some cases involve a small business that may have provided most of the family income throughout the marriage. If one spouse is going to remain with the business, we must obtain a fair value of that business in order to compensate the other spouse. To do this, a forensic accountant may be necessary to put a proper value on the business entity. Some elements of a business are not divisible in a divorce, such as the "personal good will" associated with the owner.
All retirement assets are not the same! We see cases nearly every week in which people make substantial mistakes in dividing their retirement because they fail to understand the nature of the plan being divided.
A good example is the person who looks at the value in their state or teacher retirement statement and equate it to a 401(k). This is a major mistake that is committed too often. The government retirement system provides pension benefits that can last a lifetime and often have a present value multiple times the value set out in the annual statement. There are ways to compute the present value of these pension plans as well as ways to divide almost all retirement benefits without triggering tax consequences. We do this through the use of qualified domestic relation orders, or QDROs.
In summary, these more complex property issues require careful analysis and evaluation often using associated experts to help in the process. The net result of properly addressing these more complex property issues can be a fair and equitable division of the marital estate and future security for both parties.
To discuss your divorce and property division concerns with the attorneys at Scanio & Scanio, A Professional Corporation, call us in San Marcos at 512-396-2016. You can also send us an email.