Marriage is a curious institution because it involves both emotions and property. Emotions in that a man and a woman must mentally and verbally agree to be married. Property in that once the vow is taken, any property then acquired is owned as a “community,” or jointly, by the man and the woman.
That’s fine and dandy as long as the couple stays together. But oh, what a mess is created if the couple decides to divorce.
This isn’t a family law column; it’s a business law column. There is no type of lawsuit that involves more complex business issues than a divorce with assets.
The issues arise with the type of asset. After marriage, the earnings of both husband and wife become community property.
Let’s put this to practical application. At the time of marriage, you own a house with a mortgage, a brokerage account and a car with a loan. Spouse owns a dog. You earn $100,000 a year; spouse is still in school and not working.
After three years, the marriage breaks up (who knew that spouse would run off with a college professor?) and you file for divorce. Spouse gets an attorney who asks for a judgment awarding “reimbursement.”
Totally unfair, but a good claim. True, you paid the house mortgage and the car loan for three years with your earnings, but those constituted community funds. Spouse had an undivided interest in those community funds. Technically, you used spouse’s money to “enhance” your separate assets: your house and your car.
Are you seeing red yet? We’ve only just begun.
If you added to your brokerage account during those three years, spouse is entitled to a portion of that, plus the accumulated earnings. Spouse is also entitled to a percentage of any 401(k), pension or retirement account.
Spouse may also be entitled to alimony, but that’s another column.
Now let’s add a complication: a family business. Your interest has to be valued by an expert, and the spouse either receives an ownership interest in the business or is paid off. If you haven’t been taking an adequate salary, spouse could receive a dollar value for that, too.
Shall we proceed to dividing the debt? Each person has debt coming into the marriage — that’s sole debt. The other person isn’t responsible for paying sole debt. Then there’s the debt created during the marriage — which, except in rare circumstances, is considered community debt.
The divorce court will try to divide the debt fairly — if wife borrowed money to feed the family, then the debt goes to both husband and wife. If she ran up $10,000 on her credit card at a department store on dress clothes, then she should get the debt to pay.
But wait! There’s the creditor to consider. The creditor isn’t a party to your divorce, and has a right to go after both of you for payment.
And that’s divorce, Texas style.
