Tag: Community Property Laws

Divorce: How are stock options and restricted stock handled?

According to Texas law, at the time of divorce, all community property is divisible. Moreover, all property owned by the parties in a divorce is presumed community until and unless proven to be separate property.

The court has no jurisdiction to divest either party of his or her separate property. Jurisdiction means power. Divest means take. So the court has no power to take anyone’s separate property from them.

Employer Provided Stock Options and Employer Provided Restricted Stock that are owned at the time of divorce are divisible, just like any other property. The community portion is divisible, the separate portion is not.

So, in order to determine how much of the Options or Stock is divisible, you must first determine how much of it is separate and how much of it is community.

The Texas Family Code explains how to perform the calculations to find out what is separate and what is community.

Pursuant to Section 3.007 of the Code:

A spouse who is a participant in an employer-provided stock option plan or an employer-provided restricted stock plan has a separate property interest in the options or restricted stock granted to the spouse under the plan as follows:

if the option or stock was granted to the spouse before marriage but required continued employment during marriage before the grant could be exercised or the restriction removed, the spouse’s separate property interest is equal to the fraction of the option or restricted stock in which:

the numerator is the sum of

the period from the date the option or stock was granted until the date of marriage; and

if the option or stock also required continued employment following the date of dissolution of the marriage before the grant could be exercised or the restriction removed, the period from the date of dissolution of the marriage until the date the grant could be exercised or the restriction removed;

and

the denominator is the period from the date the option or stock was granted until the date the grant could be exercised or the restriction removed; and

if the option or stock was granted to the spouse during the marriage but required continued employment following the date of dissolution of the marriage before the grant could be exercised or the restriction removed, the spouse’s separate property interest is equal to the fraction of the option or restricted stock in which

the numerator is the period from the date of dissolution of the marriage until the date the grant could be exercised or the restriction removed; and

the denominator is the period from the date the option or stock was granted until the date the grant could be exercised or the restriction removed.

The Code also provides that the computation must be done separately “for each component of the benefit requiring varying periods of employment before the grant could be exercised or the restriction removed.”

So basically, the value of the Options or Stock that is attributable to the period before marriage or after marriage is separate property. The amount attributable to the time that a person is married is community. These concepts are completely consistent with the analysis done for all property to determine whether its character is separate or community.

If you would like to discuss your situation with the attorneys at the Beal Law Firm, please call us at 817.261.4333 or 214.414.0418 or write us at lawyers@dfwdivorce.com. You can find us on the web at www.dfwdivorce.com.

Common Law Marriage: How do I know if I have one?

In Texas, there are two ways to get married, and two ways to get unmarried. You can be ceremonially married or common law married. To get unmarried – regardless of how you got married – you need a divorce or death.

There is no such thing as a common law divorce.

There are circumstances that would seem to warrant a finding of common law divorce, but they don’t. For example, if two married persons cease living together, haven’t seen each other in a couple of decades, haven’t spoken to or communicated with each other in decades, and have no property which they consider joint, many people would feel that their status is tantamount to divorce. It’s not.

Once again, there is no such thing as common law divorce.

So, it’s best to know when you are married, since being married means that everything you own is presumed to be community property, if you die or end up in a divorce.

A common law marriage arises when three things have happened:

  1. The two people live together;
  2. The two people represent to others that they are married; and
  3. Both people have agreed to be married.

Think of people living 100 years ago out in the remotest part of west Texas. There had to be a way for them to get married, since having sexual relations or living “in sin,” without the benefit of marriage, was considered taboo.

Common law marriage provided people that did not have a preacher or courthouse handy a way to make themselves “legal.”

It all made sense back then. Whether it does now is a question for another day. Regardless, the law still exists.

If you live together, even for a brief period of time, and represent to others that you are married – by, for example, introducing the other person as your wife to new people you meet, filing joint tax returns, etc. – then the only question is whether the two of you have agreed that you are married.

If neither person claims that there was an agreement of marriage, the issue may never arise. In family court, however, the problem can arise when the couple breaks up, if the first two requirements have been met. Then, the one that would most benefit from a finding that they are married sometimes claims that they are.

If the court is convinced that all three requirements have been met, then the break up becomes a divorce. And divorces have all sorts of consequences with respect to division of property, spousal maintenance, etc.

To discuss any of this with a Beal Law Firm attorney contact us at lawyers@dfwdivorce or call us at 214.414.0418 or 817.261.4333. Our website is www.dfwdivorce.com

How Do Courts Determine What’s Fair? – Property Division in Divorce

Everyone knows that property gets divided in a divorce. Buy how? What is the outcome based upon?

In a Texas Divorce, the Judge is obligated to make a “just and right equitable division” of the community estate. The Judge is supposed to do what is fair, considering the facts. But what facts can the Judge consider?

Here are a few:

  1. The age of the parties;
  2. The health of the parties;
  3. The needs of the parties;
  4. The income of the parties;
  5. The earning capacity and opportunities for future wealth and income of the parties;
  6. The separate estate of each party;
  7. The debts and liabilities of the parties;
  8. The custody of any children of the marriage;
  9. Any adultery committed during the marriage; and
  10. Any cruelty by either party to the marriage.

What is interesting about many of these factors is the way that they can cut either way. For example, a significantly older spouse can argue, “I need more of the estate, because I don’t have many more years to earn.” With the same set of facts, the younger spouse can argue to the older, “You don’t need as much money as I do, because you are not going to have as many years of life left that you need to pay for.”

Property division can be tough in a divorce. Knowing what facts matter can help you help your attorney.

If you would like to discuss your situation with the attorneys at Beal Law Firm, you can reach us at lawyers@dfwdivorce.com, call 817.919.3616 or 214.414.0418 or find us at www.dfwdivorce.com.

Know What You Know and Know What You Don’t Know – Six things you need to know about community property

Most Texans know that they live in a community property state.  The problem for many, however, is that they have no idea what that means. Even worse, many believe one or more of the common misconceptions about community property, and because of their misunderstanding, they may make decisions that cause them huge financial harm.

Here are the top six things you need to understand about Texas community property laws.

Number 1: You may not get half of the estate. 

The most common misunderstanding is the belief that community property means each party in a divorce gets 50 percent of the property that is being divided.  That’s simply not true. Both parties own an undivided interest that is susceptible to division by the Court in whatever proportion the court thinks is fair.

Number 2: Your name on an item does not make it your separate property. 

Many people believe that if the account, vehicle title, etc. has only their name on it, the item or account must be theirs and theirs alone. That thought is completely wrong. The presumption of the court is that everything acquired during the marriage is subject to division by the court.

Number 3: Not everything is community property. 

Many people believe that when the marriage occurs, everything that either party owns becomes part of the community estate. Not true. Your separate estate, if any, survives your marriage ceremony and exists during your marriage.  Separate property includes, generally speaking, anything owned prior to marriage and anything acquired by gift or inheritance. Additionally, certain parts of personal injury claims and anything traceable to separate property is separate property.

Number 4: Income from separate property is community property. 

The important corollary to this is that interest and dividends are income.  That means that the interest on a bank account owned prior to marriage is community property.  While that may not mean much if the marriage only lasts a few months, it can mean a great deal if the marriage lasts 10+ years.

Number 5: Paying for a piece of property does not turn it into community property. 

Many people believe that if the mortgage on a piece of property or a vehicle is paid with community funds, the property becomes community property.  That is not the case.  Once the character – Separate or Community – of the property has been set, it generally requires a gift or formal written agreement to change it.

Number 6: There are exceptions to the rules.

If any of the above stated rules cause you stress, don’t give up hope. Keep in mind that this is just the tip of the iceberg. There are many exceptions to the rules, and many strategies for achieving a division that is fair. For example, although payments on a mortgage do not change the character of the property, they may give rise to a claim of reimbursement.

Remember, understanding the community property system is harder than it appears at first glance. Unfortunately, marriage licenses do not have warning labels. With respect to community property, it’s probably best to know what you know, and find an attorney that knows what you don’t know.