In Texas, separate property is defined as anything that a spouse owned before marriage, any property acquired by gift, devise, or descent (inheritance), and the recovery for personal injuries sustained by the spouse during marriage, except for any recovery for loss of earning capacity during marriage. Separate property is not subject to division upon divorce and remains the property of the spouse who owns it.
Community property includes property, other than separate property, acquired by either spouse during marriage. This includes income from separate property, unless it is attributable to the personal effort of a spouse. In Texas, there is a presumption that all property possessed by either spouse during or on dissolution of marriage is community property. It is up to the spouse claiming otherwise to prove that any property is separate.
Upon divorce, the court is mandated to order a division of the estate of the parties in a manner that the court deems just and right, having due regard for the rights of each party and any children of the marriage. This typically starts with the presumption of an equal division of community property, but the court has the discretion to order an unequal division based on a variety of factors.
The court may divide the estate of the parties in a way that the court deems appropriate under the circumstances of the case. This can include awarding a disproportionate share of the community estate to one party, which may be based on factors such as fault in the breakup of the marriage, benefits the innocent spouse may have derived from continuation of the marriage, disparity of earning power, health and age of the parties, and the nature of the property.
If a spouse has committed fraud against the community estate, the court may reconstitute the community estate to include the value of any property that was disposed of by the fraudulent act. The court may also calculate the value by which the community estate was diminished as a result of the fraud and award that amount to the wronged spouse as a 'judgment' against the spouse who committed the fraud.
Under 26 U.S.C. § 1041, transfers of property between spouses or former spouses are generally non-taxable events if they are related to the end of a marriage. This includes transfers that are made under a divorce or separation instrument and occur within one year after the date on which the marriage ceases, or are related to the cessation of the marriage. The basis of the transferred property in the hands of the transferee is the same as it would be in the hands of the transferor, meaning that the recipient takes on the original cost basis of the property for tax purposes. This provision applies to both separate and marital property and is important for divorcing couples to understand as it affects the financial outcomes of property division.
The Defense of Marriage Act (DOMA) defined marriage for federal purposes as the union between one man and one woman and allowed states to refuse to recognize same-sex marriages granted under the laws of other states. However, the key provision of DOMA was found unconstitutional in United States v. Windsor in 2013. This decision has had significant implications for the recognition of same-sex marriages in terms of federal benefits and obligations, including those related to taxes and property division upon divorce. Since the Windsor decision, same-sex marriages are recognized for federal purposes, and the same rules that apply to opposite-sex marriages regarding the division of property and tax implications now also apply to same-sex marriages.
Under 11 U.S.C. § 523(a)(15), certain debts to a spouse, former spouse, or child are not dischargeable in bankruptcy. This includes debts incurred by an individual debtor in the course of a divorce or separation or in connection with a separation agreement, divorce decree, or other order of a court of record. The non-dischargeability of these debts ensures that individuals cannot escape their obligations related to the division of marital property or to provide support to a spouse or child by filing for bankruptcy. This provision is particularly relevant when one spouse is responsible for marital debts or is required to make payments to the other spouse as part of the property division process.