Divorce For High-Net-Worth Individuals Legal Representation

Divorce can be particularly complex, especially when it involves the division of assets between spouses. Properly assessing and classifying assets as either separate or community property is essential. As Texas operates under community property laws, any property obtained during the marriage is generally viewed as community property. Skilled divorce attorneys often collaborate with appraisers and financial experts to ensure that the community estate is accurately identified, appraised, and divided. At the Law office of JD, our Dallas attorneys specializing in high-asset divorces are dedicated to helping clients achieve fair results regarding property division.

Determining whether an asset should be classified as community or separate property often hinges on when the title was acquired. Spouses seeking to prove that an asset is separate must demonstrate that they obtained the title prior to marriage. According to the inception of title doctrine, the characterization of property depends on when and how a person first acquired it. However, in Texas, there’s a default assumption that all property is community property. Community property must be divided equitably, considering the rights of both parties. The burden of proof lies with the spouse claiming that an asset is separate property, requiring them to provide clear and convincing evidence. In Texas, separate property includes assets owned by a spouse prior to marriage or acquired during marriage through gifts, inheritance, or descent. Additionally, compensation for injuries sustained by one spouse during the marriage—excluding lost wages—qualifies as separate property. High-value community property can consist of various assets such as the family home, a family business, retirement accounts, savings and investment accounts, stock options, royalties, vacation properties, and other real estate. During a divorce, these assets must be divided. In lengthy marriages, the division of community property can become especially intricate, as separate and community assets may be intermixed or concealed. For instance, if an investment property was purchased before marriage but renovated using both community and separate funds, the spouse may argue for a community interest in that property.

For couples with significant assets entering marriage, drafting a premarital or postmarital agreement may be wise to safeguard those assets from being classified as community property in the event of a divorce. A well-structured agreement can reduce conflict during the divorce process by establishing in advance which assets will be treated as separate and which as community property. Our Dallas firm’s high-asset divorce attorneys can assist in creating agreements that convert specific community assets into separate property, helping to preserve their classification throughout the marriage. In the absence of such agreements, the presumption of community property can be challenged through a process known as “tracing.” This may require enlisting an expert to analyze the documentation trail associated with an asset to ascertain its classification. What about appreciating assets like rental properties or stocks that gain value during the marriage? In Texas, while the increase in value of separate property remains separate, any income generated is considered community property. For example, if one spouse rents out a property owned before marriage, the rental income is classified as community property.

The classification of trusts can be particularly intricate. Trusts represent a type of property ownership where a settler assigns legal title to a trustee and equitable title to beneficiaries. In Texas, irrevocable spendthrift trusts established prior to marriage can effectively protect separate property. The income generated from such a trust is not subject to division in divorce if the beneficiary lacks the current right to possess any trust assets. However, if a spouse has a present possessory right to any portion of the trust, the income may be divided as community property. When distributions from the trust are obligatory, or if a beneficiary retains authority over the timing and number of distributions, the income is typically regarded as community property. Conversely, if the spouse is not a trustee and income distribution is at the discretion of the trustee, such income is generally considered separate. Similarly, if a trust fund was set up for one spouse by their parents as an inheritance, the principal of that trust fund is separate property, while any income generated and distributed during the marriage is classified as community property. It is crucial for a lower-earning spouse to remain vigilant regarding the potential for a wealthier or higher-earning spouse to divert income earned during the marriage into separate trusts, potentially undermining the community estate.