Texas Divorce Attorney Blog
Real estate investments can lead to complex issues for property division in a Texas divorce, especially if there are co-owners or business entities involved. A former husband recently challenged the property division in his divorce, which characterized certain property as his wife’s separate property and awarded his father-in-law a 50% interest in a piece of real estate.
The parties moved to Texas from the U.K., intending to purchase real estate in Austin. In 2018, the wife’s parents gave her about £250,000, documented as a gift in a letter. The wife put £214,000, which totaled a little over $248,000, into a joint account. The funds were used for 97.19% of the purchase price of a property identified by the court as “the Webberville property.” The purchase and deed were in only the husband’s name based on advice from an immigration attorney.
The parties purchased “the Gunter property” with the wife’s father in late 2019. They did not have a written contract regarding the co-ownership, but the wife’s father testified they agreed he would put 50% down and own 50% of the property. He had signed a letter in November of that year, however, stating the funds he put toward the purchase were a gift with no expectation of repayment. The husband told him having only the couple on the title would facilitate the purchase, but he would amend it to add the wife’s father. The father was not added, but the husband did give him property and loss statements for the property and pay him $14,000 as his share of the rental income.
The husband and wife formed an LLC as a real estate holding company in 2020. They transferred the Webberville property to the LLC, with the wife signing an acknowledgement waiving her “right, title and interest” in the Webberville property. They transferred the property out of the LLC and back into their own names in 2023. They sold it, with the proceeds going into an account in the husband’s name and under his sole control. He made purchases and paid bills with the funds.
The wife petitioned for divorce in October, 2023. She claimed certain property was her separate property and that her separate estate had a right to reimbursement from the community. The husband appealed the property division.
Webberville Property
The husband appealed the court’s characterization of the proceeds from the Webberville property as the wife’s separate property. The wife argued 97.19% of the Webberville property proceeds were her separate property because she proved it was traceable as her separate property. She had presented clear and convincing evidence her parents gifted her the funds used to purchase the Webberville property. She had a gift letter from her parents indicating they were gifting her and her brother £250,000 each. The husband’s expert testified that approximately that same amount was transferred from her father’s account to the parties’ joint account. Furthermore, the husband acknowledged the funds were a gift from her parents, though he challenged that they were gifted solely to the wife. The appeals court concluded there was clear and convincing evidence the wife’s parents intended to gift the funds to her.
The husband argued the wife transferred the Webberville property to him as a gift. He pointed out that the property had been purchased and titled in his name, transferred at one point to the LLC, and transferred from the LLC to the names of both parties. The proceeds were put into an account in his name and sole control.
When a spouse buys real estate in the name of the other spouse during the marriage, there is a rebuttable presumption they gifted it to the spouse on the title. They can rebut this presumption with proof they did not intent to gift the property to their spouse.
The wife testified she did not intend to gift the property to the husband and only put it in the husband’s name so as not to appear to be trying to immigrate illegally. The appeals court determined this was sufficient evidence to rebut the presumption.
When property is transferred to an entity, however, it does not retain its separate or community character. The wife did not hold an ownership interest in the property after transferring it to the LLC and could not trace her separate property interest through the transfer to the LLC. The appeals court concluded the trial court erred in characterizing the proceeds from the Webberville property as the wife’s separate property.
Gunter Property
The husband also argued the trial court abused its discretion in awarding the wife’s father a 50% interest in the Gunter property to the wife’s father. The appeals court concluded that there was a valid and enforceable oral contract supporting the court’s determination.
The appeals court rejected the husband’s argument any oral contract would violate the statute of frauds because he failed to raise it as an affirmative defense at trial. The statute of frauds requires a real estate sale to be in writing and signed to be enforceable, Tex. Bus. & Comm. Code § 26.01, but it must be raised as an affirmative defense.
The wife’s father testified the couple came to him with an investment opportunity. They agreed to each pay for half, with each having the right to half the rental and later sale proceeds. The wife’s father wired funds to the title company for the option, and then wired his share of the purchase price to the couple’s joint bank account.
The appeals court stated there were “[m]any” communications at the time that acknowledged the wife’s father would own half the property and that the deed would be in the couple’s names and that the wife’s father would be added later.
The husband acknowledged he had paid the father a share of rental profits and that “there was some intention to include” him. The appeals court concluded sufficient evidence supported the court’s conclusion the wife’s father owned half the Gunter property.
The husband argued the wife’s father signed a “Gift Letter.” The wife’s father testified, however, that the couple suggested the letter would facilitate the purchase without making the father responsible for the mortgage. Communications at the time indicated the gift letter was merely intended to facilitate the purchase and that all of the parties knew the wife’s father was supplying half of the purchase price and would be half owner of the property. The appeals court concluded there was sufficient evidence of the parties’ intent to overcome the statements in the letter.
Just and Right Division
The appeals court concluded that the trial court’s mischaracterization of the proceeds of the Webberville property was substantial enough to affect the just and right division of property and require remand of the community estate to the trial court to make a just and right division.
Contact a Dallas Family Law Attorney
In this case, the wife lost the separate character of certain property when she transferred it to an LLC. If you have complex estate involving real estate investments and business entities, the experienced Texas divorce attorneys at McClure Law Group have the knowledge and skills to help you assert your rights and protect your interest. Set up a consultation at 214.692.8200.