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By nature, divorces are traumatic for spouses. However, with the introduction of litigation involving questions such as whether property will be characterized as separate or community, valuing that property, litigating which parent will provide the primary residence for the child, and whether the parent may move away with the child, the proceedings will quickly take on a very high stakes tenor. Mix in the prospect of a jury trial on fact issues in the divorce, and the litigation stakes can instantly grow even higher.

Property characterization

Most people know that property will be characterized as separate or community at the time of a divorce. Separate property is generally property owned or claimed by one spouse before marriage, property inherited by or gifted to one spouse, and some types of personal injury recovery. Many times, separate property can be quite sizeable, so it is crucial to prepare that case to preserve the separate property because it can be lost to the community without proper proof.

The primary challenge in characterization litigation comes in proving that the property is separate by the heightened standard of clear and convincing evidence, as all property is presumptively community property until proven otherwise. Ideally, the documentation proving separate ownership has not been destroyed or lost over time as the absence of such paperwork will make a difficult case even more difficult.

For a gift, all elements of the gift must be proved, and sometimes the donor is no longer alive to provide donative intent, which makes that type of case more challenging. Many times documents will show transfers of property, and may provide some indication of intent of giving it as a gift.

Proving property was owned before marriage usually results attempting to track a long history of the property, depending on the length of marriage, and acquiring ownership documents and statements from before the marriage until the date of divorce. Often the initial ownership documents may be available, but that property must be tracked forward to show the property still exists at the time of divorce.

Inherited separate property may be a bit easier to prove, depending on how long ago the property was inherited. Typically this will involve showing an inventory from the probate proceedings, along with the probate documents to show what was inherited.

But proving separate property does not end by showing something was separate property at one point in time. It also involves the meticulous showing of what happened to that property after acquisition and that it still exists in some form that can be tracked to the original separate property. Proving separate property can also involve elaborate “tracing,” tracking what part of an account is community (income earned during marriage) and what is separate. Typically this will occur in financial accounts. Failure to accurately track community and separate property in these accounts means the separate property can be regarded as “hopelessly commingled” and become community property.

What makes the characterization of property more interesting in Texas is that this issue can be submitted to a jury. Depending on the value, “ownership” could be hotly litigated, with one side defending the classification of separate property, and the other working to poke holes at every turn in the document trail.

Property valuation

Along with characterization of property, also comes the potential jury issue of valuing property. Though the judge makes the just and right division of property, it is certainly contingent on the value of the property.

Many types of property—including financial accounts, retirement, pensions and other hard assets—have clear market values. Real estate is subject to some fluctuation and an appraiser can be appointed to value that property. Further, pensions, stock options, and other employment compensation assets are typically characterized and divided according to formulas set out the Family Code.

Outside of characterization battles, the other high stakes of the estate division is valuing closely held business interests (like a medical practice, oil business, etc.) or other hard-to-value property. Many times, if a spouse owns a business, it may be the most valuable asset in the community, with all other assets paling in comparison. Frequently, only one spouse may be capable of owning and operating that business or there may be a restriction on transferring the business interest. So a value must be put in the business, and this typically involves the assistant of forensic accounting experts to conduct the proper method and approach to value that business interest.

This can be even more complicated if there is some restriction on the ownership or if a spouse is a minority shareholder, as these will affect the value of the interest. The value placed on the business can result in a large buyout of the other spouse, especially if the other assets in the community estate are not sufficient to provide equal property to the other spouse. Judges rarely think it’s a good idea for two divorcing spouses to remain in business together. As a result, there are often very big fights in family litigation, with experts dueling over the market value of a community property business. What one spouse thought was their life’s work can sometimes result in a painful and costly buyout of the other spouse.

Custody

Although property battles can become quite heated, perhaps nothing is as intense as litigation over custody issues. With the trial court retaining jurisdiction over those children until the age of majority, parents may be facing years of high-stakes fighting over the children. Custody litigation is almost always personal and cases can quickly become very nasty.

These fights almost always involve decisions on which parent (or both) gets to make decisions about the child’s education, medical issues, mental health therapy, and other issues decided by the judge. It will also involve the potential jury issues of which parent will provide the primary residence for the child, and what geographic area that parent may establish the primary residence. Contested custody cases can also result in the process of custody evaluations by psychologists, including psychological testing, observation of the parents and children, and interviews with the parents and collateral witnesses.

All too frequently issues of substance abuse, family violence, mental health history, poor choices of the parent, alienation and a host of related facts will play into the custody decision. This dirty laundry is all on display in contested custody cases, and will almost certainly play into the ultimate decision about a child’s primary residence. Given that standard possession is roughly 40 percent of the child’s time, it would seem that this would not be as big of an issue anymore, but custody litigation still is going strong in Texas. And many times, a parent will also request the other parent have supervised visitation or some other limitations put in place for the safety of the child. In instances in which family violence is alleged, litigation is highly likely, given the serious implications of a protective order and the quasi-criminal nature of those proceedings.

Another issue of extreme high-stakes litigation is the issue of the “move away.” Essentially this means that a parent is asking the court to establish the primary residence in another county, state or even country. This can happen at the time of divorce, or in a modification later. Typically this would come up if a parent had a better job opportunity, to move closer to immediate family, or to relocate with a new spouse. These are obviously high stakes for both parents, because a long-distance move can sever one parent’s involvement in the child’s day-to-day life, severely impact visitation in general. Texas has an established public policy of wanting parents to maintain a close relationship with their children with most trial courts taking an unfavorable view of relocation cases.

Even the most amicable of divorces are in truth a powder keg. Introducing questions surrounding proving a large separate estate, valuation of a community property business, and a primary residence/move-away child custody issues, as well as the complexities of possible family violence or substance abuse, can prove to be a true high-stakes test of a family law litigator.

By nature, divorces are traumatic for spouses. However, with the introduction of litigation involving questions such as whether property will be characterized as separate or community, valuing that property, litigating which parent will provide the primary residence for the child, and whether the parent may move away with the child, the proceedings will quickly take on a very high stakes tenor. Mix in the prospect of a jury trial on fact issues in the divorce, and the litigation stakes can instantly grow even higher.

Property characterization

Most people know that property will be characterized as separate or community at the time of a divorce. Separate property is generally property owned or claimed by one spouse before marriage, property inherited by or gifted to one spouse, and some types of personal injury recovery. Many times, separate property can be quite sizeable, so it is crucial to prepare that case to preserve the separate property because it can be lost to the community without proper proof.

The primary challenge in characterization litigation comes in proving that the property is separate by the heightened standard of clear and convincing evidence, as all property is presumptively community property until proven otherwise. Ideally, the documentation proving separate ownership has not been destroyed or lost over time as the absence of such paperwork will make a difficult case even more difficult.

For a gift, all elements of the gift must be proved, and sometimes the donor is no longer alive to provide donative intent, which makes that type of case more challenging. Many times documents will show transfers of property, and may provide some indication of intent of giving it as a gift.

Proving property was owned before marriage usually results attempting to track a long history of the property, depending on the length of marriage, and acquiring ownership documents and statements from before the marriage until the date of divorce. Often the initial ownership documents may be available, but that property must be tracked forward to show the property still exists at the time of divorce.

Inherited separate property may be a bit easier to prove, depending on how long ago the property was inherited. Typically this will involve showing an inventory from the probate proceedings, along with the probate documents to show what was inherited.

But proving separate property does not end by showing something was separate property at one point in time. It also involves the meticulous showing of what happened to that property after acquisition and that it still exists in some form that can be tracked to the original separate property. Proving separate property can also involve elaborate “tracing,” tracking what part of an account is community (income earned during marriage) and what is separate. Typically this will occur in financial accounts. Failure to accurately track community and separate property in these accounts means the separate property can be regarded as “hopelessly commingled” and become community property.

What makes the characterization of property more interesting in Texas is that this issue can be submitted to a jury. Depending on the value, “ownership” could be hotly litigated, with one side defending the classification of separate property, and the other working to poke holes at every turn in the document trail.

Property valuation

Along with characterization of property, also comes the potential jury issue of valuing property. Though the judge makes the just and right division of property, it is certainly contingent on the value of the property.

Many types of property—including financial accounts, retirement, pensions and other hard assets—have clear market values. Real estate is subject to some fluctuation and an appraiser can be appointed to value that property. Further, pensions, stock options, and other employment compensation assets are typically characterized and divided according to formulas set out the Family Code.

Outside of characterization battles, the other high stakes of the estate division is valuing closely held business interests (like a medical practice, oil business, etc.) or other hard-to-value property. Many times, if a spouse owns a business, it may be the most valuable asset in the community, with all other assets paling in comparison. Frequently, only one spouse may be capable of owning and operating that business or there may be a restriction on transferring the business interest. So a value must be put in the business, and this typically involves the assistant of forensic accounting experts to conduct the proper method and approach to value that business interest.

This can be even more complicated if there is some restriction on the ownership or if a spouse is a minority shareholder, as these will affect the value of the interest. The value placed on the business can result in a large buyout of the other spouse, especially if the other assets in the community estate are not sufficient to provide equal property to the other spouse. Judges rarely think it’s a good idea for two divorcing spouses to remain in business together. As a result, there are often very big fights in family litigation, with experts dueling over the market value of a community property business. What one spouse thought was their life’s work can sometimes result in a painful and costly buyout of the other spouse.

Custody

Although property battles can become quite heated, perhaps nothing is as intense as litigation over custody issues. With the trial court retaining jurisdiction over those children until the age of majority, parents may be facing years of high-stakes fighting over the children. Custody litigation is almost always personal and cases can quickly become very nasty.

These fights almost always involve decisions on which parent (or both) gets to make decisions about the child’s education, medical issues, mental health therapy, and other issues decided by the judge. It will also involve the potential jury issues of which parent will provide the primary residence for the child, and what geographic area that parent may establish the primary residence. Contested custody cases can also result in the process of custody evaluations by psychologists, including psychological testing, observation of the parents and children, and interviews with the parents and collateral witnesses.

All too frequently issues of substance abuse, family violence, mental health history, poor choices of the parent, alienation and a host of related facts will play into the custody decision. This dirty laundry is all on display in contested custody cases, and will almost certainly play into the ultimate decision about a child’s primary residence. Given that standard possession is roughly 40 percent of the child’s time, it would seem that this would not be as big of an issue anymore, but custody litigation still is going strong in Texas. And many times, a parent will also request the other parent have supervised visitation or some other limitations put in place for the safety of the child. In instances in which family violence is alleged, litigation is highly likely, given the serious implications of a protective order and the quasi-criminal nature of those proceedings.

Another issue of extreme high-stakes litigation is the issue of the “move away.” Essentially this means that a parent is asking the court to establish the primary residence in another county, state or even country. This can happen at the time of divorce, or in a modification later. Typically this would come up if a parent had a better job opportunity, to move closer to immediate family, or to relocate with a new spouse. These are obviously high stakes for both parents, because a long-distance move can sever one parent’s involvement in the child’s day-to-day life, severely impact visitation in general. Texas has an established public policy of wanting parents to maintain a close relationship with their children with most trial courts taking an unfavorable view of relocation cases.

Even the most amicable of divorces are in truth a powder keg. Introducing questions surrounding proving a large separate estate, valuation of a community property business, and a primary residence/move-away child custody issues, as well as the complexities of possible family violence or substance abuse, can prove to be a true high-stakes test of a family law litigator.