Getting a fair division of property in a Texas divorce can be complex, but it is  further complicated when claims for reimbursement and economic contributions come into play.

However, effective September 1, 2023, legislative changes to Chapter 3, Subchapter E of the Texas Family Code have provided some clarity in this area. The amendments focus on what constitutes a reimbursement claim and offset, as well as what elements must be proved to recover such claims or offsets. Here's what you need to know:

What Constitutes a Reimbursement Claim?
According to the new law, a claim for reimbursement exists when one or both spouses use the property of one marital estate to benefit another estate in a way that would result in unjust enrichment if not repaid. This could be as straightforward as using community funds to pay off a debt that should be the responsibility of one spouse's separate property.

Proving a Reimbursement Claim
To establish a valid reimbursement claim, the spouse seeking reimbursement must prove:

1. Usage of property from one marital estate to benefit another.
2. The value of the conferred benefit.
3. That unjust enrichment would occur if the benefit isn’t repaid.

Benefits Conferred on Another Marital Estate
The new amendments define "benefit conferred" in several ways:

1. Payment of a debt, liability, or expense that should have been paid by the benefited estate.
2. Making improvements on real property, resulting in enhanced value.
3. Investing time, toil, talent, or effort beyond what's necessary to manage or preserve a spouse's separate property, without adequate compensation to the community estate.

Determining the Value of Benefits
The value of the benefit is determined as of the date the trial begins. It can be calculated based on:

1. The amount of debt, liability, or expense paid.
2. The increased value of the real property.
3. The value of the time, toil, talent, or effort spent.

Unjust Enrichment: A Court's Decision
The court will decide whether unjust enrichment has occurred, taking into consideration all aspects of the case.

Resolving Reimbursement Claims
The court uses equitable principles to resolve these claims, including the possibility of offsetting one claim against another.

Offset Claims
An offset claim can be proven by the spouse not seeking reimbursement, who bears the burden of proof. Offsets can include:

1. Value of the use and enjoyment of the property by the conferring estate.
2. Income received by the conferring estate from the benefited estate.
3. Any reduction in tax obligations due to tax-deductible items related to the benefited estate.

The changes to Chapter 3, Subchapter E of the Texas Family Code seek to clarify the complexities surrounding reimbursement claims and economic contributions in the context of divorce. As always, consulting with an experienced family law attorney is crucial for navigating the intricate details of this legal landscape.

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The last thing you want is for your divorce proceedings to disrupt your business. This article aims to address a common question we often hear from clients struggling both with managing a divorce and with running a small businesses in Texas: "How can I safeguard my business from a disruptive divorce process?"

1. Protect Business Records
Keep detailed records for your business, clearly separating personal expenses from business ones. This will make it easier to provide an accurate picture of your business finances during divorce proceedings.

2. Involve Legal Counsel Early On
Talk to a divorce lawyer with experience in handling cases involving business owners as soon as possible. They can offer strategic advice tailored to your unique circumstances, helping to ensure that your business suffers minimal disruptions.

3. Keep Business and Personal Assets Separate
Make sure to keep your business assets separate from your personal assets. Mixing the two can complicate property division and might put your business at greater risk.

4. Spousal Employment Agreements
If your spouse works in the business, consider a spousal employment agreement that outlines compensation and what happens if employment ends. This can protect both your business and personal financial interests.

5. Opt for Mediation or Collaborative Divorce
These are less adversarial options that can be quicker and less disruptive to your business. In these approaches, both parties work together to find mutually beneficial solutions, avoiding the complexities of a court battle.

6. Prepare for the Worst
Lastly, always prepare for the worst-case scenario. Make contingency plans and backup arrangements to keep your business running smoothly, irrespective of the divorce proceedings.

Remember, safeguarding your business during a divorce in Texas requires careful planning and expert legal advice. If you find yourself facing this challenging situation, don't hesitate to seek out the assistance of a qualified divorce attorney who understands the intricacies of Texas law as it pertains to both divorce and business ownership.

Every kind of divorce can raise some complicated questions that must be answered, but when you receive your income as the owner of a small business, things can get even more complex.  One of those complex questions is:  "How will child and spousal support be calculated based on my business income?"  If you're in Texas, this guide aims to shed light on this important issue.

Understanding Texas Law on Child and Spousal Support
Texas has specific guidelines when it comes to child and spousal support, often known as child custody and alimony. For child support, the court typically bases the calculation on the non-custodial parent's income. Spousal support, on the other hand, is generally decided after considering multiple factors including financial needs, educational levels, and employment history.

Business Income as a Factor
When you own a small business, your income can be more complex to assess than a standard W-2 worker. Not only do you have your own salary, but you may also have business profits, assets, and even losses. All of these will be considered when determining your ability to pay child and spousal support.

Gross Income vs. Net Income
It's crucial to understand the difference between gross and net income, particularly when you own a business. Gross income includes all earnings before expenses, while net income is what you actually take home after expenses. Texas courts generally consider your net resources, which may include both your take-home pay and a share of the business income if it is not reinvested or obligated for business expenses.

Business Expenses and Deductions
It's common for business owners to reinvest profits back into their businesses. In such cases, these reinvested funds may not be considered as "available income" for support calculations. However, the court may closely scrutinize your business expenses to ensure they are legitimate and not artificially inflated to lower support payments.

Special Child Support Considerations for High-Income Earners
In Texas, child support guidelines only apply to obligors with a monthly net income of up to $9,200 per month (this amount is valid until 2025 when it will be adjusted up for inflation). If your income exceeds this, the court has the discretion to consider the child's "proven needs" and may order higher payments based on a variety of factors, including lifestyle and the child’s accustomed standard of living.

Consult a Qualified Attorney
Calculating child and spousal support based on business income is a complex matter that requires specialized knowledge. Therefore, it's essential to consult with an experienced divorce attorney who understands both Texas law and the intricacies of owning a small business.
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If you have more questions about how your small business will affect child or spousal support in a Texas divorce, please don't hesitate to reach out to our team for a personalized consultation.

In the world of civil litigation in Texas, parties often arrive at an agreement to resolve specific issues or even the entire lawsuit. When this occurs, the consensus is documented to create an enforceable contract. However, the form that this documented agreement takes can be either an agreed order signed by a judge or an agreement under Texas Rules of Civil Procedure 11 (Rule 11 Agreement). While the two may seem interchangeable, the nuances in their enforcement, modification, and overall standing within the legal ecosystem make them distinct from one another.

Rule 11 Agreement
​A Rule 11 Agreement is an accord between the parties memorialized in writing and signed by the parties and their respective attorneys. It is named after Rule 11 of the Texas Rules of Civil Procedure, which essentially sets the foundation for such agreements. This rule permits the parties to file the agreement with the court. However, it lacks the court's formal approval, as it is not signed by a judge.

Benefits and Limitations of Rule 11 Agreement

1. Flexibility: Parties can negotiate terms without court intervention.
2. Simplicity: A less formal and straightforward way to document an agreement.
3. Limitation in Enforcement: Being essentially a contract, it may require a separate suit to enforce, making it a less direct means of enforcement than a court order.
4. Modification: The agreement can be altered or revoked by subsequent written agreement, but changes will generally not involve the court's oversight.

Judge-Signed Agreed Order
An Agreed Order, on the other hand, takes things a step further. After the parties reach an agreement, they submit it to the judge for approval and signature. Unlike a Rule 11 Agreement, the judge's signature on the order makes it a formal judicial act.

Benefits and Limitations of an Agreed Order

1. Enforceability: The order can be enforced directly by the court through contempt, thereby providing a quicker and more straightforward path for enforcement.
2. Finality: The judge’s signature adds an extra layer of conclusiveness to the agreement.
3. Modification: Any changes generally must go back before the court for approval, making it more rigid but providing a framework for resolution of disputes about modifications.
4. Judicial Scrutiny: The court's involvement ensures that the agreement is in line with statutory and case law, which adds an extra layer of protection for both parties.

Practical Considerations
The form the agreement takes often depends on the specific circumstances, the relationship between the parties, and what is at stake in the litigation. For example, in cases involving child custody or other sensitive issues, the court generally prefers to issue an agreed order to maintain oversight of the situation.

Understanding the intricacies between a Rule 11 Agreement and a judge-signed Agreed Order is vital for both attorneys and clients navigating the civil legal system in Texas. A Rule 11 Agreement is a more flexible, contract-based instrument but could involve a cumbersome enforcement process. An Agreed Order provides a stronger, more direct mechanism for enforcement but requires judicial scrutiny and approval, making it a more rigid document. Knowing when to use each can dramatically affect the outcome, enforceability, and modification of agreements in civil litigation.

Divorce is a complicated process, and it becomes even more intricate when you own a small business. One question we frequently encounter from our clients who own small businesses is, "How will my business debts be handled in a Texas divorce?" Below, we outline some of the key points to consider.

Community Property State
Texas is a community property state, which means that most assets and debts acquired during the marriage are considered jointly owned by both spouses. This generally includes business debts unless you can prove they are separate property.

Separate vs. Community Debts

• Separate Debt: If your business was established before the marriage and you haven't commingled marital assets into the business, the debts are likely to be considered separate and not subject to division in divorce.
• Community Debt: If the business was established during the marriage or marital assets were used in the business, the debts are generally considered community debts and will be divided between both parties.

Proving Character of Debt
The burden of proving whether a debt is separate or community typically lies with the party making the claim. Detailed financial records can be a vital asset in this process. You might also need a forensic accountant to trace funds and demonstrate the nature of the debt.

Division of Debt
Debts, like assets, must be divided "just and right" in a Texas divorce. This doesn't always mean a 50/50 split. Courts consider factors like each party’s income, earning potential, and who was more responsible for incurring the debt.

Protective Measures
If you are concerned about business debts, it's important to take protective measures:

1. Prenuptial/Postnuptial Agreements: A well-drafted agreement can specify what happens to business debts in the event of a divorce.
2. Business Structure: Structuring your business as a corporation or LLC can sometimes protect personal assets from business debts, although it's not foolproof.

Consult an Expert
This is a complicated area of divorce law, especially when a small business is involved. If you have questions about your own situation, consult with a divorce attorney who understands both family law and business financials to get tailored advice.
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Divorce is a challenging time, but understanding how business debts are handled can remove some of the uncertainty. Take steps to protect your interests and consult professionals to navigate this complex landscape.

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If you are interested in continuing to own a jointly held family business after your Texas divorce you may be able to "buy your spouse out" in an agreement.  But there are several factors to consider.

Community Property State
Firstly, it’s essential to note that Texas is a community property state. This means that any assets—including businesses—acquired during the marriage are usually considered community property and are subject to division. Therefore, your spouse may have a legitimate claim to a portion of the business.

Business Valuation
Before you can think about buying out your spouse's share, you'll need to have the business accurately valued. This often involves hiring a forensic accountant or business valuation expert. They will assess various factors like assets, debts, cash flow, and future earning potential to establish a fair market value for the business.

The Buyout Process
Once the value is determined, you can proceed with the buyout. This can be done in several ways:

1. Lump-Sum Payment: You could pay your spouse a lump sum equal to their share of the business value.
2. Asset Swap: You could give your spouse other assets equivalent to the value of their share in the business.
3. Installment Payments: An agreement could be structured where you pay your spouse over time.

Spousal Agreement
If both parties are amicable and agreeable, you may be able to negotiate the terms of the buyout directly. If not, court intervention might be necessary. It’s always advisable to get any agreement in writing, typically as part of your final divorce decree.

Financial Implications
Don’t forget the financial aspects such as tax implications of a buyout. Discuss this with your financial advisor and attorney to understand the most tax-efficient way to structure the buyout.

Seek Professional Help
Considering the complexities involved, it's imperative to consult with legal professionals who have experience in divorces involving closely held business interests. They can guide you through the legal maze and help protect your business interests while ensuring you comply with Texas law.

So yes, buying out your spouse’s share in the family business is generally possible in a Texas divorce, but it’s crucial to approach it carefully and consult with professionals to navigate the complexities involved.

If you have more questions about your specific situation, please don’t hesitate to reach out to us for a consultation.

Do you REALLY need to hire a forensic accountant for business valuation in your Texas divorce? The answer to this question isn't straightforward—it depends on your situation. However, here are some factors to consider that can help you make an informed decision.

Complexity of Your Business
If your business is a straightforward operation, like a sole proprietorship with a single income stream, you might not need a forensic accountant. On the other hand, if your business is complex, has multiple income streams, or involves intricate financial instruments, a forensic accountant can be invaluable.

Disagreements Over Value
If you and your spouse can't agree on the value of the business, or if you suspect that there are undisclosed assets, a forensic accountant can provide an unbiased third-party valuation. They can dig deep into the business's financials to provide a more accurate and fair value.

Community Property State
Texas is a community property state, meaning assets acquired during the marriage are generally split equally in a divorce. If your business was started or significantly grew in value during your marriage, it's likely considered community property. A forensic accountant can help establish a fair division of these assets.

Expert Testimony
In contentious divorces, or those with significant assets at stake, expert testimony may be required. A forensic accountant can act as an expert witness, offering a credible valuation of your business that may be more convincing to a court than a simple estimate.

Tax Implications
Dividing a business can have significant tax implications. A forensic accountant with experience in divorce cases can help you understand potential tax burdens or benefits from various division scenarios.

Due Diligence
Even if you think you have a clear picture of your business’s value, the due diligence conducted by a forensic accountant can either confirm this value or reveal details that might significantly change it. This could be essential for ensuring a fair division of assets.

Cost vs Benefit
Hiring a forensic accountant can be expensive, but you should weigh this cost against the potential financial implications. If your business is high-value, or if there’s a large discrepancy in how you and your spouse view its value, the cost of an accountant may be a sound investment.

Conclusion
So, do you need to hire a forensic accountant for your Texas divorce? If your business is complex, if you and your spouse disagree on its value, or if there are substantial assets at stake, the answer is likely yes. In any case, consult your divorce attorney for personalized advice tailored to your unique situation.
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Remember, the stakes are high, and having an expert in your corner can make all the difference in achieving a fair division of assets.

Divorce has the potential to wreak havoc on your financial life—especially if you're a small business owner.  Can a prenuptial or postnuptial agreement protect your  business in a Texas divorce?

The short answer is yes, if it is done correctly.  Let's delve into the specifics.

Prenuptial Agreements
A prenuptial agreement is a legal contract entered into by a couple before their marriage. This agreement outlines the distribution of assets, including business interests, in the event of divorce or death. In Texas, prenuptial agreements are generally honored as long as they meet certain requirements:

• The agreement must be in writing.
• It must be signed voluntarily by both parties.
• Both parties should have ample opportunity to consult with separate legal counsel.
• The agreement must be made with a full disclosure of all assets and liabilities.

If these conditions are met, a prenuptial agreement can be an effective tool for protecting your business in a Texas divorce. It can stipulate that the business is separate property and not subject to division.

Postnuptial Agreements
Similar to a prenuptial agreement, a postnuptial agreement is a contract entered into by a couple after they are already married. While postnuptial agreements weren't always enforceable in Texas, changes in law have made them a viable option for protecting your business. Just like with prenuptial agreements, full disclosure of assets and liabilities, as well as the voluntary nature of the agreement, are key for enforceability.

Community Property State Considerations
Texas is a community property state, which means that all assets acquired during the marriage are considered jointly owned by both spouses and are subject to division in a divorce. However, a well-crafted prenuptial or postnuptial agreement can define your business as separate property, thus protecting it from being divided in the divorce.

Final Thoughts
While a prenuptial or postnuptial agreement can offer significant protection for your business, it's crucial to consult an experienced divorce attorney to ensure that the agreement is legally sound and enforceable. Every business and marriage is unique, and a one-size-fits-all approach rarely works when it comes to legal matters as important as protecting your livelihood.
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If you have questions about how to safeguard your business in a Texas divorce, don't hesitate to reach out to our expert team for personalized advice tailored to your situation.

Navigating a divorce is complicated enough, but when you throw a small business into the mix, the stakes can feel incredibly high. One of the most common questions we hear from business owners considering divorce in Texas is, "Will my spouse be entitled to half of my business?" While the answer isn't a simple yes or no, there are several factors to consider that can provide clarity.

Community Property
First, it’s important to understand that Texas is a community property state. This means that assets and debts acquired during the marriage are generally considered communal and are thus subject to division upon divorce. However, this doesn't necessarily mean a 50-50 split; rather, Texas law stipulates a "just and right" division of community property.

Pre- or Postnuptial Agreements
If you have a prenuptial or postnuptial agreement that addresses the business, this will generally dictate the division of assets. These agreements can protect a business from becoming a part of the marital estate if properly drafted and executed.

Date of Business Establishment
If the business was established before the marriage, it might be considered separate property, thus exempting it from division. However, the increase in value of the business during the marriage could be considered community property.

Involvement of Spouse in the Business
The level of involvement your spouse has in the business can significantly impact how it is divided. If your spouse has contributed to its success, whether financially or through labor, they may be entitled to a share in its value.

Valuation of the Business
Accurate business valuation is critical in determining how it will be divided. A forensic accountant or a business valuation expert is often hired to assess the true value of the business, considering various elements like assets, debts, revenue, and future earning potential.
Possible Outcomes

1. Buyout: One spouse buys out the other’s share based on the business valuation.
2. Co-ownership: The spouses continue to co-own and operate the business, albeit separately.
3. Sale: The business is sold, and proceeds are divided between the spouses.
4. Asset Distribution: One spouse retains the business while the other receives assets of equivalent value.

Consult a Professional
Divorce involving a small business is a complex matter, requiring expertise in both family law and business valuation. It is advisable to consult with an experienced divorce attorney who can guide you through this challenging process.
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If you have more questions or need expert legal advice, don't hesitate to reach out to us for a consultation.

If you or your spouse own a small business and you're contemplating divorce, you're likely wondering how the business will be valued during the process. The valuation of a business in a divorce is a critical aspect that can significantly affect the division of assets. Here’s a detailed overview of the process.
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Importance of Accurate Valuation
An accurate business valuation is sometimes vital to ensure a fair division of assets in a Texas divorce. The valuation can influence spousal support, property division, and even child support in some cases. Both parties must agree on the value of the business, or else a court may have to intervene.  A professional valuation by one or the other, or even both spouses as a joint venture may be critical step in resolving disputes about the division of the community estate.  It is important to consult with an attorney experienced in cases involving closely held business interests.

Owning a small business makes your divorce case more complex than others,  and the reality may be that the community estate will have expenditures in processing your divorce that others do not.  This includes the valuation of the business.  Your attorney will help you in taking the right path in saving on the expenses of handling the division of closely held business, but also in getting effective results in Court from those investments.  Here are some of the steps you and your lawyer may need to go through in valuing a small business.

Step 1: Choose a Valuation Method
There are multiple methods for valuing a business, but the most commonly used are:

1. Market Capitalization: This method is often used for publicly traded companies and involves multiplying the company's share price by its total number of outstanding shares.
2. Comparable Sales: This involves comparing your business to similar businesses that have recently been sold.
3. Earnings Multiplier: This method involves taking the business's earnings and multiplying them by an industry-specific multiplier.
4. Asset-based Approach: This involves calculating the value of all business assets and subtracting liabilities.

Step 2: Hire Professionals
For a high-stakes matter like this, it's often advisable to hire a professional like a Certified Business Appraiser or a forensic accountant specialized in business valuations. They can provide a more accurate and impartial valuation.

Step 3: Collect Financial Records
Your appraiser will need several years of income statements, balance sheets, and tax returns. The more complete and accurate this data is, the more precise the valuation will be.  If you are the one running the business, you will likely have access to this information.  If not, it will have to obtained through the process of discovery.

Step 4: Analyze Cash Flow and Earnings
Consistent earnings and positive cash flow generally increase a business's value. Your appraiser will examine these in detail.

Step 5: Assess Intangible Assets
Intangible assets such as brand reputation, customer loyalty, and intellectual property can also add value to a business and should be assessed.

Step 6: Apply Discounts or Premiums
Factors like majority ownership, market conditions, or specific operational risks can result in discounts or premiums being applied to the valuation.

Step 7: Review and Finalize
Once the draft valuation is complete, both parties should review it. If there's disagreement, additional negotiation or even court intervention may be necessary to finalize the valuation.

​Valuing a business in a divorce is a complex but crucial process that requires careful attention to detail and, often, the expertise of professionals. If you're going through a divorce and are concerned about your business, seeking qualified legal advice is paramount.

Divorce is a complex and emotionally taxing process. If you own a small business, the stakes are even higher. Your business is not just a source of income; it's often a labor of love, years in the making. So, it's natural to wonder: how will my small business be affected by divorce?
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Marital Property vs. Separate Property
The first thing to consider is whether the business is considered marital or separate property. Generally, if the business was started during the marriage and both spouses contributed to its growth, it's likely to be considered marital property. In contrast, if one spouse owned the business before the marriage and kept it separate, it might remain separate property. Case law on this aspect is tricky and nuanced so consult your attorney for specifics as it relates to your situation.

Business Valuation
Determining the value of a business in a divorce can be a contentious issue. You may need to hire a forensic accountant or a business appraiser to establish the business's worth. This valuation will be critical when negotiating property division.

Division of Assets
The division of your business will depend on whether you reside in a community property state or an equitable distribution state. In community property states, each spouse is typically entitled to half of all marital assets, including businesses. In equitable distribution states, assets are divided based on a variety of factors like contribution to the marriage, the length of the marriage, and the needs of each party.

Buyouts and Co-ownership
If the business is marital property, one option is to buy out your spouse's share. This can be an expensive route, but it allows you to keep the business intact. Alternatively, some ex-spouses continue to co-own and operate the business together post-divorce, although this requires a strong working relationship.

Spousal and Child Support
Your business income could affect spousal and child support calculations. Higher business income may result in higher support payments, making it even more essential to get an accurate business valuation.

Safeguarding Your Business
There are ways to protect your business before divorce becomes a consideration. Prenuptial or postnuptial agreements can specify what happens to the business in the event of a divorce. Keeping clear financial boundaries between business and personal assets can also be helpful.
Legal and Professional GuidanceDivorce involving a small business is often complex, and it’s advised to consult legal professionals who specialize in both family law and business assets. They can help you navigate the complexities and minimize the impact on your business.

Divorce can have significant implications for your small business, but proactive planning and expert advice can help you manage the challenges. As each divorce is unique, you need to meet with an experienced divorce attorney to discuss the specifics of your situation. Remember, protecting your business means protecting your future, so make informed decisions guided by professional advice.