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Dividing Employee Bonuses in Texas Divorce: Who Gets What?

4/25/2024

 
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In Texas, a spouse's bonus can significantly impact the financial discussions during a divorce. These bonuses may be awarded by an employer to recognize an employee-spouse's dedication and hard work, and can range from annual bonuses to stock options and performance-based awards. The critical question often arises in divorce proceedings: Is the bonus considered marital property to be divided, or is it the separate property of the spouse who earned it?

Understanding Marital vs. Separate Property in Texas
Under Texas law, marital property includes all assets and debts accumulated during the marriage, except for gifts, inheritances, and certain types of personal injury claims. Separate property refers to assets or debts one spouse brought into the marriage or acquired after the marriage ends, with some exceptions. This distinction is crucial when determining how bonuses are treated in a divorce settlement.

How Courts Evaluate Bonuses
The classification of a bonus—whether it's marital or separate property—depends significantly on the specifics of the bonus arrangement. There's no standard bonus structure; they can be contingent on various factors like sales metrics, company profitability, or specific achievements like a successful public offering or acquisition.

In cases where a bonus is under consideration, Texas courts need to evaluate several factors:
  • The timing of the bonus's vesting and payment
  • The conditions under which the bonus was granted
  • The employee's ability to meet these conditions independently
  • The contribution of the marriage to the employee's ability to earn the bonus
For example, if a sales manager at a software company in Texas is awarded stock options based on past and expected future performance, a court will consider how much of that performance overlaps with the marriage. If the options vest during the marriage and are contingent on sales targets achieved during the marriage, they might be considered marital property.

Hypothetical Bonus Scenarios
Consider a local executive who expects an annual bonus based on performance reviews. If a divorce judgment is entered in September, and the bonus is paid annually, a court might decide that a substantial part of the bonus is marital property. The exact split will depend on the couple's marital duration within the bonus year. For instance, if the couple was married for nine of the twelve months, 75% of the bonus might be deemed marital property, with the remaining 25% as separate property.

However, Texas family courts are guided by principles of equity, meaning that the division isn't always a simple split. Courts might consider additional factors like each spouse's economic needs, contributions to the marriage, and any misconduct affecting the marital estate.

The Importance of Legal Representation
Given the complexities involved in classifying and dividing bonuses in divorce, having an experienced family law attorney is crucial. An attorney can help navigate the intricate details of bonus agreements and advocate for a fair division of these assets based on the unique circumstances of your case.  With the right legal guidance, parties can ensure that their financial interests are protected during the division of assets in a Texas divorce.

Navigating the Complexities of the Family Home in Divorce

12/29/2023

 
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In the intricate landscape of divorce, few assets bear as much emotional and financial weight as the family residence. For many clients, the family home is not just a building; it’s a tapestry of memories, emotions, and financial investments. It's the center of family life, a symbol of stability, and often, the largest asset in marital property. Recognizing and addressing the multifaceted nature of this asset is crucial in any divorce settlement.


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The Threefold Nature of Residential Issues in Divorce

When dissecting the complexities of the family residence, we can identify three core areas of concern: use, disposition, and tax implications.

1. Use Issues: These concerns revolve around the interim use of the home from separation to settlement. They encompass who lives in the house, who manages it, debt responsibilities, access to belongings, and sometimes, child-related considerations.

2. Disposition Issues: This area focuses on the ultimate fate of the residence in the divorce settlement. Typically, outcomes include selling the property to a third party, one spouse retaining it, or both parties agreeing to co-own it for a period, often until a child reaches a milestone like high school graduation.

3. Tax Issues: Tax implications straddle both use and disposition. They involve potential deductions for mortgage interest and property taxes, which affect temporary support calculations. When it comes to selling or transferring the property, understanding capital gains or losses is critical for an informed decision-making process.

Strategic Benefits of Categorization

Approaching the family residence topic by categorizing these aspects serves multiple strategic purposes:
  • Organizational Clarity: It helps structure asset and liability information, making it easier for parties to understand the situation, identify areas needing more information, and recognize when professional advice (from accountants, appraisers, or attorneys) is necessary.
  • Reframing the Dialogue: Often, clients enter mediation after unsuccessful negotiation attempts, marked by frustration and stalemates. By categorizing these issues, mediators can guide parties towards a more constructive and solution-focused conversation. This approach not only brings clarity but also encourages cooperation in developing new strategies to overcome the impasse.

In conclusion, addressing the family residence in divorce requires a nuanced understanding of its emotional significance, financial value, and the legal implications. By breaking down the issues into manageable categories and reframing the conversation, mediators and attorneys can guide clients towards more effective and satisfying resolutions.

Should I Move Out Before I File For Divorce?

5/22/2023

 
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​Whether or not you should move out before filing for divorce depends on your individual situation. There are pros and cons to each option and the right decision varies greatly depending on you particular situation.  For example, if you are seeking custody of your children, leaving the home without them will put you in a significant disadvantage when the actual custody proceedings begin.  However, If you're experiencing conflict or abuse in the home, moving out may be necessary for your safety and wellbeing. In such cases, you may want to seek a protective order from the court to ensure your safety. 

​On the other hand again, moving out before filing for divorce could impact your legal rights and obligations related to property division, and spousal support. If you move out and your spouse stays in the marital home for longer than a year, it could be interpreted as abandonment, which could weaken your legal position in the divorce proceedings.  It's best to consult with a qualified family law attorney to understand the implications of moving out before filing for divorce in your jurisdiction.

My husband and I are divorcing and I think I deserve most of the property.

4/28/2014

 
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 Alright then.  The first thing to understand is that the court begins with the idea that your property should be divided "fairly and equitably".  (Keep in mind this DOES NOT necessarily mean 50/50).  So if you want more than fair, it becomes your job to prove to the court that you deserve more than fair.

You likely need to tell the court in your first paperwork (called a "Petition") that you are claiming one of the 28 different factors that the court can consider in deciding whether to grant a disproportionate division of what you earned during the marriage (a.k.a. "community property").  You will have to plead that one of these things changed the normal presumption of equal division to your favor.  You need justify why you should get the lion's share of the property by claiming one or more of the following: 

1.  Husband was at fault in the breakup of the marriage;

2.  You would have received benefits from the continuation of the marriage;

3.  He earns much more than you;

4.  Your health is worse than his;

5.  You got the children so you should get more property to help pay for them;

6.  Your children's needs are great;

7.  Your education is less than his and/or your prospects for the future are lower;

8.  You are less employable than him;

9.  There is a lot of marriage debt;

10.  The division of property will put more tax burden on you;

11.  The differences in you ages is great;

12.  The earning power, business opportunities and abilities favor your husband;

13.  You need future support;

14.  The kind of property to be divided means it would be fair for you to get more;

15.  Your husband wasted your community property;

16.  You husband doesn't deserve any credit for temporary support he paid you;

17.  Your husband used community funds to pay for out of state property;

18.  Your husband decreased your community property because he gave unreasonably valuable gifts during the marriage;

19.  You can show that your efforts (time, talent, labor) unduly increased your husband's separate property (which the court has no power to divide) and you should be compensated;

20.  Your husband gave so much of your community property away to his separate estate or to the children that it was unreasonable and should be compensated;

21.  The community estate should be compensated;

22.  Your husband is expecting a large inheritance;

23.  You should have more money to pay for attorney's fees;

24.  You used up your separate property to create community property;

25.  The size and nature of your separate property is much less than his;

26.  You disproportionately created community property by your own efforts, whereas he did not;

27.  He committed fraud (lied) that put you in a worse financial position than you otherwise would be in;

28.  His actions amounted to fraud, even if he didn't technically lied that put you in a worse financial position than you otherwise would be in. 

These are called to Murff Factors after the original case:  Murff v. Murff, 615 S.W.2d696,698 (Tex.1981).

It should be noted that requested a disproportionate share of the community property will eventually require you to prove your allegations.  Claiming something is easy.  Proving it is another matter.  If you want a disproportionate property division, you probably will need an experienced lawyer to help you with this. 


My husband claims that the house is his separate property and the court cannot award it to me in the divorce.  Is he right?

4/2/2014

 
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My husband and I lived together for about a year before we got married.  We were looking for a home and decided on one just before our wedding ceremony.  To make sure the loan went through, we applied through my husband's credit (which was excellent- mine was not good due to a recent bankruptcy).  He got the loan and we financed 100% of the payments.  My husband signed an earnest money contract and we went off to our wedding.  When we got back, we closed on the house and I co-signed all the paperwork as the wife.  Thereafter, we made all the loan payments from our joint account.

Now that we are divorcing, my husband claims that the house is his separate property and the court cannot award it to me in the divorce.  Is he right?


As odd as it may sound, and as unfair as it may seem, your husband is probably right.

All property that is possessed during a marriage is presumed by the courts to be community property and subject to division by the courts.  However, this presumption can be rebutted if a party can show that the property was acquired before the marriage.

The result is what is called the "Inception of Title" rule, which basically says if you can prove the property became the legal ownership of one party before the marriage, it is considered that party's separate property and cannot be taken from him or her in the divorce.  

Normally ownership begins in the moment when you obtained legal title to the property, but oddly, not in the case of real estate.  For real estate, the court traces the characterization back to the earnest money contract.  This was the holding in Wierzchula v. Wierzchula, a 1981 case.  

However, there are several factors here which should give you some solace:

1.  It is your husband's burden to overcome the community property presumption.  For example, if he can't produce the earnest money contract in court, the judge may declare the property community anyway.

2.  Just because the property is characterized as your husband's separate property doesn't mean you loose out on all the mortgage payments that were made from your joint account.  You will still have an equitable reimbursement claim on all that money- which the court may award you.  You may not get the house itself, but you can get back a lot of the value of it.  Make sure that your pleadings ask for this.

3.  The Wierzchula case mentions the fact that the house in question was the homestead of the parties, that is, they were living in it.  If your house was not a homestead but instead was, or at some point became, a rental or other investment property, you may be entitled to the income generated from that property.  The general rule is that rents collected during a marriage, even if from one party's separate property are considered community property. (McElwee v. McElwee, 1995).

So the bottom line is that although your husband can't lose title to the house, under your circumstances, the court is free to reimburse back to the community estate the mortgage payments made on the house, and also any income generated from the house as it deems fair and right.  I would also suggest that if you can prove that the house has appreciated in value significantly over the time of the marriage, then you may also be able to convince the court that the appreciation is also community property, subject to right and proper division.  However, you would have to investigate this further because in today's depressed real estate market such appreciation is no longer an assured fact.  

    Need more information about this or other family law topics in Texas?
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    Attorney Sean Y. Palmer has over 20  years of legal experience as a Texas Attorney and over 25 years as a Qualified Mediator in civil, family and CPS cases. Palmer practices exclusively in the area Family Law and handles Divorce, Child Custody, Child Support, Adoptions, and other Family Law Litigation cases. He represents clients throughout the greater Houston Galveston area, including: Clear Lake, NASA, Webster, Friendswood, Seabrook, League City, Galveston, Texas City, Dickinson, La Porte, La Marque, Clear Lake Shores, Bacliff, Kemah, Pasadena, Baytown, Deer Park, Harris County, and Galveston County, Texas.
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​This website is for educational and informational purposes only and is not, nor is it intended to be,  legal advice. Viewing of this website does not create an attorney-client relationship. All legal matters should be discussed with a licensed attorney before you take any action. You should consult with an attorney for advice for your individual situation. Sean Y. Palmer is the attorney responsible for the content of this site. 



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