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Specialty tag(s): Property Division, Characterization of Separate and Community Property

How to Avoid Losing Your Separate Property in Divorce

Clint Westhoff | February 22, 2021

Your rights regarding your separate property are important, and in Texas, the state constitution even protects your separate property rights. A probate court cannot undo the decisions you make before you die regarding your separate property. A divorce court cannot take away your separate property if your marriage ends in divorce. However, you can do things, sometimes even with the help of an attorney, where you inadvertently lose all your separate property protections and rights.

If you want to know more about separate property, you can watch another video by Clint Westhoff at this link: How Do I Prove What Property Is My Separate Property

Setting Up a Company With Your Separate Property

The best way to illustrate how easy it can be to lose your separate property is with a real-life example from an appellate case. It started from a divorce case that was litigated before a trial court for close to three years. Then the case was appealed and that took another year. The result was that the wife lost her separate property. If she had consulted with an attorney who was knowledgeable about separate property in Texas, she not only would have been able to keep her separate property, but she likely could also have avoided years of litigation.

In that case, the wife owned about two acres of land before she got married. If you have reviewed the video linked above regarding separate property, you know that real property is your separate property if you own it before marriage. During the marriage, the wife created a Limited Liability Company and conveyed the land to her new company. This is a widespread practice, and there are many excellent reasons to hold real estate you own within a Limited Liability Company.

During her divorce case she had the Limited Liability Company deed the two acres of land back. It was the exact same two acres of land that she owned in her name before marriage that she then owned in her name during the divorce. However, she had put it into a company and taken it out of a company. By making those conveyances of the land, the land at the time of her divorce was community property even though it was the exact same acres of land that she had owned before her marriage.

What You Can Do

Get a Marital Property Agreement:

If you have separate property to protect and are contemplating making changes to your financial situation that could impact your separate property, the best method to protect your rights is a Marital Property Agreement. Suppose you and your spouse have the same understanding of how your separate property should be treated, and those understandings and agreements are put into a properly drafted and executed Marital Property Agreement. In that case, your separate property can be protected.

Having a Marital Property Agreement in place before you make any changes to your separate property is essential. However, you can also do it after the fact so long as you and your spouse agree. Financial conversations in a marriage can be difficult, but having an open and honest discussion about your separate property and putting the agreements between you and your spouse in writing has many benefits. You can learn more about Marital Property Agreements by reading Every Married Couple in Texas Has a Marital Property Agreement . . . Do You Know What is in Yours?

Speak to an Attorney that Specializes in TX Family Law

You can do most estate planning, asset protection, and business entity planning and structuring in a way that protects any separate property interests that you may have. The problem arises when working with an attorney who does not even know you have separate property, or when you are working with an attorney who does not specialize in an area of law that deals with separate and community property rights. Your business lawyer may be the best in the state at structuring an asset purchase agreement for your separate property company but may have no idea how a covenant not to compete being part of that transaction can impact your separate property rights.

The attorneys at Goranson Bain Ausley can help you make sure that your separate property rights are protected when you enter into financial and business transactions that involve your separate property.

Conclusion

It is important to keep track of your separate property. It is also important to protect your separate property during your marriage, or you could lose it. Even when you are using the help of a lawyer for legitimate purposes not related to the character of your separate property, you could lose your separate property because your business lawyer may not even know that they are dealing with your separate property when they are, for example, setting up a new company for you. Suppose you wait to address these issues until after the transactions are completed. In that case, there is a chance that you will have accidentally given up substantial separate property rights that you otherwise would have had.

You can protect your interests from these types of risks by speaking to a lawyer familiar with the law regarding separate property before you do any transaction affecting property you believe to be your separate property.

If you have more questions about marital property rights, contact Clint Westhoff at 214-473-9696.

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