How Can You Protect Your Assets During a Divorce?

On Behalf of Robert S. Clark Sr.

Nov 15, 2024

Texas is a community property state, which means there are specific rules about how assets are to be divided in case of divorce. Here’s some advice from a divorce lawyer in Houston, TX, on practical steps that can provide you with greater control over your assets during a divorce.

How Can You Protect Your Assets During a Divorce? Tips from a Divorce Lawyer in Houston, TX

In Texas, community property laws set guidelines for how assets are divided during a divorce. Most property that a couple has acquired while they’re married is considered, legally speaking, to be jointly owned, so it’s subject to division in a divorce even if only one party actually paid for the asset at the time it was acquired.

Assets that were brought into the marriage by each party are usually considered to be separate property unless they were mingled with shared assets. The same is true of inheritances and specific gifts to one or the other person. Of course, lines of ownership can and do blur over time.

Keep Detailed Financial Records

Accurate financial records are very helpful for showing who owns which asset or property item during a divorce. Concrete evidence of what you contributed financially can go a long way toward demonstrating what is jointly owned property and what is separate. Bank statements, financial records, appraisals, and proof of ownership can all be useful in proving what belongs to you.

If separate property has appreciated in value during the marriage, or if there have been investments in real estate or business ventures, financial records help to make it clear what each party contributed. For example, if you inherited property before the marriage but improved it using marital funds, having records of the funds used to improve the property will make it easier to calculate how much of the property’s value remains separate.

Avoid Commingling Assets

Commingling is when separate and marital assets are mixed, and it is difficult to distinguish between the two. This often happens when funds from individual accounts are put into joint accounts or when marital funds are used to improve or maintain separate property. Once assets are commingled, they are often no longer classified as “separate” property and are subject to division in divorce.

To avoid this, keep separate assets in individual accounts and avoid blending them with joint marital accounts. If you receive a gift or inheritance intended to be personal, deposit it in an account that’s only in your name. You want to prevent unintentional conversions of separate property into community property.

Create a Prenuptial or Postnuptial Agreement

A prenuptial agreement should spell out which assets stay with each spouse if the marriage ends. This is especially useful in high-asset marriages or for individuals who own businesses, significant investments, or properties acquired before the marriage. Having questions of ownership clearly laid out will help to avoid drawn-out disputes if the marriage dissolves.

If you’re already married, you can create a postnuptial agreement to set out how assets are to be divided in the event of a divorce. Like prenuptial agreements, postnuptials require full disclosure of assets. It’s best to have a lawyer help with developing these agreements.

Consider a Trust to Safeguard Specific Assets

Setting up a trust is another effective way to protect assets during a marriage, since trusts can hold property separately from the marriage. This is a good idea for those who have children from a previous marriage or if you want to keep control of specific assets, like family heirlooms or a business.

If you have assets in a trust, it is likely that those assets would not be considered joint marital property and would not be subject to division during the settlement. You can designate beneficiaries for the trust and set how and when the trust’s assets are distributed.

Be Cautious with Real Estate and Joint Property Titles

The name or names on a real estate title can decide how it is divided. If you own a home prior to marriage but then add your spouse to the deed later on, adding the spouse’s name to the title or mortgage can convert separate property into community property.

If you want to retain control over a particular property, it’s best to have only your name on the deed, even if you marry, to keep the property separate in name and management. If that isn’t a possibility, keep detailed records to show that it was acquired as separate property.

Avoid Making Major Financial Changes During Divorce Proceedings

Once a divorce is filed, sudden major financial transactions, like selling assets or transferring funds, will draw attention from the courts. You want to avoid the suspicion that assets are being hidden or reduced to impact the division. If you feel you do need to make a significant financial move, talk it over with your attorney beforehand.

It is a good idea to open a new bank account in your name while going through a divorce. You want to keep personal funds separate, especially if you receive income or funds that should not be considered community property.

Seek Professional Financial and Legal Advice

Get advice from both legal and financial experts to help you make good decisions. You want someone with a clear head, who is outside the process, to advise you on things like community property law in Texas and the long-term impacts of asset division.

If you suspect that assets are being hidden or underreported, your lawyer can help you find a forensic account who’ll be able to trace your spouse’s financial activity and uncover any discrepancies in the records.

Be Transparent to Avoid Legal Complications

Don’t attempt to hide assets, and don’t provide incomplete financial information. In Texas, divorcing spouses are required to disclose all assets and liabilities fully, and not doing so can jeopardize your case. Be transparent with your financial information. It will build trust with the court and may prevent disputes and costly legal proceedings.

Make Retirement Accounts Part of Your Strategy

In Texas, contributions made to retirement accounts, such as 401(k)s, IRAs, and pensions, during the marriage are typically classified as community property. This means that retirement funds will most likely need to be divided equally, even if one spouse was the primary earner.

To protect your retirement funds, you might consider using alternative assets to offset a portion of the retirement account value or explore options like a Qualified Domestic Relations Order (QDRO) to avoid penalties during division. A financial planner can help you make informed decisions about how to balance retirement needs with other concerns.

Think Carefully About Spousal Support and Alimony

Spousal support, also known as alimony, can be a significant consideration in cases involving a long marriage or substantial income disparities. Texas law doesn’t automatically grant spousal support, but it can be awarded under certain circumstances.

Discuss spousal support early in the process to help you decide on a good strategy for dividing your assets. Agreeing to provide a specific support amount could potentially offset other asset claims.

Consult with your attorney about fair arrangements for spousal support, to help yourself avoid financial strain.

For personalized advice on protecting your assets in a divorce, contact the Clark Law Firm, P.C., in Houston, TX.

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