Texas Divorce Attorney Blog

Considerations in Texas Divorces Involving Complex Business Assets

Published on: April 20, 2023 | by Francesca Blackard

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For many business owners and entrepreneurs, their business is not only imperative to their financial well-being but is also a large part of their identity. This can raise obvious concerns when divorce is on the horizon. And when a couple owns a large business or corporation, or the business assets are complex in nature, the thought of dividing business assets can be overwhelming. Nonetheless, dividing complex business assets is often required, and, therefore, it is imperative that spouses understand how Texas law handles these situations.

WHAT ARE COMPLEX BUSINESS ASSETS?

Complex business assets are assets that belong to or are associated with a business that do not necessarily lend themselves to simple valuation or division. For example, the monetary value of a business’s goodwill or intellectual property rights are two common examples of complex business assets.

ARE BUSINESS ASSETS DIVIDED BETWEEN SPOUSES IN A TEXAS DIVORCE?

The short answer is it depends. Texas is a community property state. So, any assets that are acquired by either spouse during the marriage are presumed to be community property, which is subject to division upon divorce. However, determining whether complex business assets are community property is not always a straightforward endeavor. And even then, this is only the first question courts must answer when hearing a divorce involving complex business assets.

Texas Court Denies Mother’s Request to Relocate with Child

Published on: February 25, 2023 | by Kelly McClure

iStock-1147846829-300x200 The best interest of the child is the primary consideration in Texas custody matters, but the courts have identified factors to be considered in determining the child’s best interest in certain circumstances. A mother recently appealed a court’s denial of her request to remove a geographic restriction, arguing the court failed to properly balance the appropriate factors.

The divorce decree gave the mother the exclusive right to designate the child’s primary residence with a geographic restriction. It also required both parents to provide the other written notice before taking the child out of the country.

The mother married a man who lived in Oklahoma. She ultimately petitioned for modification and requested removal of the geographic restriction. The father believed she had already moved to Oklahoma and sought the right to designate the child’s primary residence.

Texas Divorce Decree Must Comply with Material Terms of Parties’ Rule 11 Agreement

Published on: February 21, 2023 | by Francesca Blackard

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Parties to a Texas divorce may enter into a Rule 11 agreement to resolve issues in their case. The agreement must be made in open court and entered into the record, or be in writing, signed, and filed with the court. A Rule 11 agreement must be complete in material details and contain all of the essential elements of the agreement. It is an abuse of discretion for a court to enter a judgment that is not in compliance with material terms of the agreement. A mother recently appealed a final divorce decree that she claimed did not comply with the terms of the Rule 11 agreement.

Parties Enter into Rule 11 Agreement

According to the appeals court’s opinion, the parties’ Rule 11 agreement provided they would be joint managing conservators of the two minor children, with the mother being primary for determining their residence with a geographic restriction. The father would continue picking up the daughter from school. The father would have a standard possession order for the son. The son had the option to have dinner at the father’s on Thursday. No alcohol was to be consumed during or for four hours prior to the father’s possession. Child support would be calculated according to the guidelines based on the father’s 2019 Schedule C “unless Schedule C gross receipts are higher for 2020 as filed.”

The parties both moved to enter the final decree, with the mother indicating they had not agreed regarding child support. At the hearing, she argued the parties intended child support to be calculated without subtracting expenses from the gross receipts if the 2020 gross receipts were higher. The father argued different language would have been used if that was the intent. He argued the language required the child support to be calculated according to the guidelines, which require calculation of net income before determining child support.

Texas Court Addresses Validity of Post-Nuptial Agreement

Published on: February 18, 2023 | by Kelly McClure

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While it is not the most comfortable thing to consider before or during the marriage, premarital and postnuptial agreements are critical to establishing each partner’s property and financial rights. Texas law provides a mechanism for couples in a marriage to accomplish the same results that could have been created in a premarital agreement. These post-nuptial agreements are often referred to as “marital property agreements.”

There is a general understanding that there are many reasons why a couple might want to change the character of their marital assets during their marriage. Accordingly, the formalities and enforcement rules for post-nuptial agreements are, in effect, the same as for premarital agreements. However, Texas post-nuptial agreements are often prone to issues surrounding unconscionability and involuntariness.

TEXAS COURT FINDS POST-NUPTIAL PARTIAL AND EXCHANGE AGREEMENT INVALID AND UNENFORCEABLE

In one of the more recent published opinions regarding post-nuptial agreements, a Texas appeals court affirmed a trial court’s judgment finding that a post-nuptial Partition and Exchange Agreement (PEA) was not valid or enforceable.

How Do Texas Courts Value a Medical Practice During Divorce Proceedings?

Published on: February 17, 2023 | by Kelly McClure

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Valuing a closely-held medical practice during a divorce in Texas requires a complex understanding of the measures of value, methods of valuation, and Texas statutes. Although business valuations do not adhere to precise mathematical processes, general methods, procedures, and principles exist. In Texas, determining the value of medical practice is often a critical and hotly contested aspect of divorce proceedings. Understanding how a court will incorporate the value of medical practice to come to a “just and right” division of property is crucial to securing a favorable outcome in a divorce.

TEXAS ASSETS DURING A DIVORCE

Texas is a community property state, meaning only property created or accrued during the marriage is subject to division during a divorce. Community property may include real estate, businesses, medical practices, cars, money, and retirement accounts. Under the law, courts must make divisions that are “just and right.” It is important to note that “just and right” does not necessarily equate to a 50 percent division.

OWNERSHIP OF MEDICAL PRACTICE AFTER A DIVORCE

Medical practices fall under an important caveat of Texas’ property division laws. The Corporate Practice of Medicine (CPOM) doctrine prohibits non-physicians, entities, or corporations from practicing medicine. Thus, a court cannot divide the ownership of a medical practice to a non-physician spouse; instead, the court can only determine and divide the value of the practice.

Texas Court Rejects Mother’s Request to Modify Relocation Restrictions in Recent Divorce Appeal

Published on: February 14, 2023 | by Kelly McClure

iStock-902725964-300x200 When a judge finalizes a Texas divorce involving the custody of children, they will determine which parent has the right to determine where the child will live. However, courts will almost always place certain restrictions on that parent’s ability to relocate. While a relocation restriction may not immediately be an issue for a parent with primary custody, that may change if they obtain employment elsewhere in the state or decide to move for other reasons.

MOTHER UNSUCCESSFULLY SEEKS MODIFICATION ORDER TO PERMIT RELOCATION

In a recent opinion issued by the Fifth District Court of Appeals in Dallas, the court rejected a mother’s request to modify a divorce decree that placed restrictions on her ability to relocate as well as her rights to travel internationally with her son. According to the court’s opinion, Mother and Father divorced in November 2016. At that time, the court gave Mother the right to determine where the child would live, provided it was within Dallas County, Collin County, or Southlake Independent School District. The divorce decree also required either parent to provide written notice to the other if they intended to travel outside the United States with their son.

In July 2017, Mother married a man who lived in Oklahoma. Mother started to spend as much time as possible in Oklahoma, and she would often take her son. Subsequently, Mother sought modification of the initial divorce decree in hopes of being able to relocate. Father filed a counter-petition, hoping to be named as their son’s conservator so he could keep the child in Dallas County, Collin County, or Southlake Independent School District.

The Potential Property Division Issues That Can Come Up in a Texas High-Net-Worth Divorce

Published on: February 13, 2023 | by Francesca Blackard

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Texas is one of just a handful of states that follows that “community property” doctrine. Under Texas Family Code § 3.003, all property obtained by either spouse during the marriage is presumed to be community property, meaning both spouses have an equal ownership interest. And while disagreements related to how a couple’s assets are divided are common in all Texas divorces, this is especially the case in high-net-worth divorces.

WHAT IS A HIGH-NET-WORTH DIVORCE?

While there is no official definition of what constitutes a high-net-worth divorce in Texas, the consensus among Texas divorce attorneys is that any divorce involving liquid assets of $1 million or more is considered a high-net-worth divorce.

WHAT ISSUES COMMONLY ARISE IN HIGH-NET-WORTH DIVORCES?

High-net-worth divorces can involve all the typical aspects of a divorce, including child custody, child support, division of assets, and spousal support. However, due to the value and complexity of the assets, high-net-worth divorces tend to raise other issues, especially as they relate to property division. For example, a high-net-worth divorce may require the court to determine how the following classes of assets should be distributed:

401(k)s, IRAs and other retirement accounts;
Stocks, bonds, cryptocurrency and other investment holdings;
Real estate and property holdings;
Shared ownership in a business;
Pensions and benefits; and
Artwork and other collections.

Texas Court Prohibits Parents from Communicating

Published on: February 11, 2023 | by Kelly McClure

iStock-1163040189-300x200 Texas has a public policy to assure frequent and continuing contact between children and “parents who have shown the ability to act” in the children’s best interest. Tex. Fam. Code § 153.001(a). In some circumstances, however, parents are not able to effectively communicate and co-parent. In a recent case, the appeals court upheld a trial court order restricting the parents’ communication with each other and with the children while in the other parent’s care.

According to the appeals court, the agreed final divorce decree appointed the parents joint managing conservators. It gave the mother the exclusive right to designate the primary residence of the children and receive child support. Both parties had the right to consent to non-invasive medical and dental care and the right to consent to invasive procedures after meaningful consultation with the other.

Both Parents File Competing Motions for Enforcement and Modification

The mother moved for enforcement alleging the father had kept the children several days beyond his spring break possession.

The father filed his own enforcement motion, alleging the mother failed to maintain insurance, provide information required to submit a health insurance claim, pay uninsured health expenses, and notify him of activities and medical appointments. He also petitioned for modification.

Showing a Material and Substantial Change of Circumstances for Texas Custody Modification

Published on: February 9, 2023 | by Francesca Blackard

iStock-902725964-300x200 A court may modify a Texas custody order if doing so is in the child’s best interest and there has been a material and substantial change in circumstances. The party seeking modification must show the conditions at the time of the prior order and the subsequent changes. To determine if there has been a substantial and material change, the factfinder must be able to compare historical and current evidence. A mother recently challenged a custody modification, arguing the father had not presented evidence of the circumstances at the time of the divorce.

According to the appeals court’s opinion, the 2018 agreed divorce decree appointed the parents joint managing conservators and gave the mother the exclusive right to designate the children’s primary residence.

The father petitioned for modification and the exclusive right to designate the children’s primary residence after the mother’s nanny told him the stepfather was abusing them.

Texas Appeals Court Reverses Separate Property Characterization in Divorce Case

Published on: February 7, 2023 | by Francesca Blackard

In a Texas divorce, the trial court must divide the estate in a just and right manner, but the division does not have to be equal. Property possessed by either party during or on dissolution of the marriage is presumed to be community property. To rebut the presumption, a party must generally trace the property back to separate property. Without tracing, a party’s testimony they purchased the property with separate funds will generally not be sufficient to rebut the presumption. However, a presumption of separate property arises if a deed includes a separate property recital stating the property is transferred as separate property. If a spouse is party to a transaction, they may not contradict the deed’s express recitals with parol or extrinsic evidence without evidence of fraud, accident or mistake. If a spouse is not party to the transaction, however, they may use parol evidence to contradict the recitals.

A husband recently challenged the characterization of property in his divorce.

Both parties requested a disproportionate share of the community estate. The husband also requested reimbursement based on alleged waste and actual fraud by the wife.