Division Of High Value AssetsDivorces involving complex or high value estates require particular attention and expertise. Most divorces involve division of a marital estate involving bank accounts, investment accounts, a homestead, and some type of retirement. High value assets can be overlooked as "personal property," unless the parties to a divorce specifically tell their attorneys to fight for a particular item. Among the most often overlooked assets are jewelry and fine art.
How to Divide Property in Texas
Texas is a community property state. This means that under Texas law, courts assume anything acquired during a marriage is community property, according to the Inception of Title Rule. Community property is subject to division between the divorcing parties. The division should be "just and right," but is generally assumed to be just and right if assets are split evenly. There are many exceptions, however. To properly divide a marital estate in Texas, each asset possessed by the divorcing parties must:
1. Be classified as marital property or non-marital property,
2. Have a proper valuation established, if it is marital property, then
3. Be divided, within the context of the entire estate.
Each of these steps can create controversy. For example, if a home is separate property because it was owned by one spouse prior to marriage, the other spouse may still be entitled to reimbursement for a portion of any payments made on the house using community income. If the house is refinanced in both spouses' names, then it could become community property. Unless both spouses are willing to reside in the same house post-divorce, the house could be divided by splitting the proceeds of a sale or by giving the spouse who leaves a disproportionate share of the remaining marital estate. Obviously, many parties to a divorce will not agree about how to handle each step classifying, valuing, and dividing particular assets.
Experienced Attorneys Know the ExceptionsThe exceptions to the general rules regarding community property in Texas are what separate good divorce lawyers from great divorce lawyers. There are too many nuances to dividing community property in Texas to explain here. However, you should be aware of common issues.
JewelryJewelry is unique because it is often presented as a gift or inherited as an heirloom. Gifts, even from a spouse, are generally considered separate (non-marital) property. Inherited items are also separate property. Separate property, of course, is not subject to division in a divorce. The owner will keep it. However, the classification of jewelry can become unclear in certain circumstances. For example, if a wife inherits jewelry that includes a men's Piaget watch, and her husband begins wearing it regularly, did the wife "gift" the Piaget to the husband? This is now a fact question that will be resolved in court, if the parties do not agree. The parties will need to present evidence to a judge or jury and they will decide if the watch is a gift or not. Another example is a couple that purchases jewelry with an understanding that it is not any person's particular property. If a husband and wife purchase a charm bracelet with the intention of giving it to a future, unborn child, then who does the bracelet belong to when they divorce before having children? Or, how do we classify a collection of opal jewelry intended as an investment, but selected and worn solely by the wife? Both cases, the charm bracelet and the opals, are likely marital property and subject to division, even if that requires auctioning them.
Fine ArtFine Art is a particular challenge in divorce because of the difficulty establishing a proper valuation. A single Dali or Picasso can outweigh the value of the remaining marital estate. Worse, fluctuations in the art market mean that a prized sculpture may be worth less than either spouse will accept, at the time of divorce. Art is also likely to have an unclear classification. A lawyer may purchase paintings for his office, for example, but end up hanging them at home. At some point, his wife will have an argument that they are marital property. Even if a doctor uses business income to purchase a painting for his waiting room, if his practice is not properly established as a separate business entity, then the painting may be community property. Similarly, art that is inherited and given to a museum for display "By Mr. and Mrs. Smith" would, arguably, belong to both spouses.
Other Special Assets
Experienced attorneys handling high value estates will look for issues that could affect the value of the estate while trying to protect their clients' property. You should seek advice from a high value asset or complex divorce attorney if you have these types of property:
- Businesses, including partnerships or sole proprietorships
- Real estate in multiple states or foreign jurisdictions
- Homestead property of significant value
- Purebred companion animals, especially if breeding or if exotic (big cats, for example)
- Livestock, including cattle, horses, and exotic game
- Multiple retirement and investment accounts
- Yachts, boats, super cars, aircraft