Dallas High-Net-Worth Property Division Attorney
Dividing a substantial marital estate can be one of the most consequential parts of a divorce. When the estate includes businesses, real estate, investments, trusts, executive compensation, retirement assets, or significant separate property, determining what each spouse owns and how the marital estate should be divided can require extensive financial and legal analysis.
At LaMorgese Family Law, Brad M. LaMorgese represents clients in high-net-worth property division matters in Dallas-Fort Worth and throughout Texas. As part of his broader complex divorce and financial litigation practice, Brad handles property disputes involving sophisticated financial structures, substantial separate-property claims, business ownership, and other assets that may require valuation or tracing.
These cases are rarely resolved by simply adding up assets and dividing the total. The character of the property, the reliability of valuations, the availability of records, tax considerations, liquidity, and the long-term consequences of a proposed division can all affect the strategy.
How Property Is Divided in a High-Net-Worth Texas Divorce
Texas is a community property state, but that does not mean each spouse automatically receives half of every asset.
Texas Family Code Section 7.001 directs a court to divide the estate of the parties in a manner the court considers “just and right,” having due regard for the rights of each party and any children of the marriage. This gives the trial court discretion when dividing the community estate.
Before a court can determine how property should be divided, however, the property must be properly identified and characterized.
Under Texas Family Code Section 3.001, separate property generally includes property owned before marriage, property acquired during marriage by gift or inheritance, and certain recoveries for personal injuries. Section 3.002 defines community property as property, other than separate property, acquired by either spouse during marriage.
Texas law also creates an important presumption: property possessed by either spouse during or at the dissolution of the marriage is presumed to be community property. A spouse claiming that an asset is separate property must overcome that presumption by clear and convincing evidence.
In a substantial estate accumulated over many years, determining which assets are community, separate, or subject to other claims can become a significant part of the litigation.
Identifying the Entire Marital Estate
A high-net-worth property case begins with understanding what is actually in the estate.
Some assets are relatively straightforward to identify. Others may be owned through corporations, partnerships, limited liability companies, trusts, investment vehicles, or other entities. Compensation may also extend well beyond salary and include equity awards, bonuses, deferred compensation, or other benefits.
A substantial estate may include:
- Closely held companies and professional practices
- Partnership and membership interests
- Commercial and residential real estate
- Brokerage and investment accounts
- Private equity and other privately held investments
- Retirement accounts and pension benefits
- Stock options and restricted stock
- Deferred compensation
- Trust interests and distributions
- Oil, gas, mineral, or royalty interests
- Significant inherited or gifted assets
- Assets owned before marriage
The existence of an asset is only the beginning of the analysis. Ownership, characterization, value, liquidity, transfer restrictions, debt, and potential tax consequences may all need to be considered before a meaningful division can be developed.
Business Ownership Can Change the Property Division Analysis
For business owners and their spouses, a closely held company may represent a substantial portion of the family’s wealth while also serving as a primary source of income.
Those competing roles can make the business particularly important during divorce.
A company may need to be valued even when there is no intention to sell it. Questions can arise regarding ownership percentages, valuation dates, cash flow, debt, marketability, control, goodwill, retained earnings, and the effect of shareholder or partnership agreements.
The distinction between the value of a business and the income generated by the individual who operates it can also become important.
Because valuing a business during divorce can significantly affect the overall division of a substantial estate, financial professionals may be involved to analyze company records and address competing valuation positions.
In many cases, dividing the business itself is neither practical nor desirable. One spouse may retain the ownership interest while the overall property division uses other assets or financial arrangements to account for the value awarded to that spouse.
Separate Property Can Become More Difficult to Prove Over Time
Separate-property issues are particularly important in high-net-worth cases because substantial wealth may predate the marriage or originate from gifts, inheritances, family businesses, or other separate sources.
The difficulty is often proving what happened to that property over time.
An investment account owned before marriage may have changed custodians several times. Securities may have been sold and the proceeds reinvested. Inherited funds may have been used to purchase another asset. Separate funds may have moved through an account that also contained community funds.
Texas courts presume property possessed during or at the dissolution of marriage to be community property unless the separate character is established by clear and convincing evidence. Texas appellate decisions have also recognized the importance of tracing and clearly identifying property claimed as separate.
As a result, tracing substantial separate-property claims may require years of bank statements, brokerage records, purchase documents, tax records, business records, and other financial evidence.
Missing records can matter. The Supreme Court of Texas has considered a separate-property tracing dispute in which alleged gaps in investment-account records became central to whether the community-property presumption had been overcome.
Trusts and Inherited Wealth Require Careful Analysis
Trusts can present issues that are different from other assets in a marital estate.
A spouse may be a beneficiary of a trust without owning the underlying trust property. In other situations, questions may concern distributions, income, control, powers held by a beneficiary or trustee, or property transferred to or from a trust during marriage.
The trust instrument itself can be critical.
Inherited wealth can create similar characterization issues. An inheritance generally falls within Texas’s definition of separate property, but complications can arise when inherited funds are later invested, transferred, combined with other funds, or used to acquire different assets.
Cases involving trusts in divorce and family litigation may therefore require analysis of the trust documents as well as the history of particular assets and distributions.
Executive Compensation and Equity-Based Benefits
For executives and other highly compensated professionals, salary may represent only one part of total compensation.
Compensation packages can include restricted stock units, stock options, performance awards, bonuses, deferred compensation, profit-sharing arrangements, partnership interests, and retirement benefits. Some rights may be granted during marriage but vest later, while others depend on future employment or performance.
Texas Family Code Section 7.003 specifically addresses the rights of spouses in retirement plans and other employee benefits, including stock option plans, employee stock plans, and other forms of employee savings or compensation.
The timing and terms of an award can therefore matter. A current account balance may not capture all of the financial rights that need to be evaluated in a divorce.
Real Estate and Investment Assets May Have Different Economic Values
A division that appears equal on paper does not necessarily leave both spouses in the same financial position.
Consider an estate containing cash, a concentrated securities portfolio, commercial real estate, retirement accounts, and an interest in a private business. Each asset may have a stated value, but those values do not necessarily reflect liquidity, transaction costs, debt, restrictions on sale, or future tax exposure.
Texas Family Code Section 7.008 permits a court dividing a marital estate to consider whether a particular asset will be subject to taxation and, if so, when the tax will be required to be paid.
That can be particularly important when comparing assets with materially different tax characteristics.
The goal in a sophisticated property case is therefore not merely to compare gross values. The structure of the proposed division and the financial characteristics of the assets being received also deserve careful consideration.
Reimbursement Claims Can Affect a Complex Estate
Characterization is not the only issue that can arise when separate and community property interact.
In some circumstances, one marital estate may have contributed property or resources for the benefit of another estate, potentially creating a reimbursement claim. These issues can arise, for example, when community resources are used in connection with certain separate-property obligations or improvements.
Reimbursement is distinct from simply declaring an asset community or separate. In a substantial estate with long financial histories, the distinction can affect both the claims presented and the evidence needed to support them.
Undisclosed Assets and Fraud on the Community
Accurate financial disclosure is critical to a meaningful property division.
Concerns sometimes arise regarding transfers made before or during divorce, unusual expenditures, undisclosed accounts, movement of assets to third parties, or transactions involving a closely held business.
Texas Family Code Section 7.009 provides a statutory framework when a spouse has committed actual or constructive fraud on the community. If the trier of fact finds fraud, the court calculates the amount by which the community estate was depleted and the value of the “reconstituted estate.” The court may then divide that value in a just and right manner and has statutory authority to grant specified legal or equitable relief.
In a financially complicated divorce, investigating a suspected depletion of the estate may require review of bank records, business transactions, credit card activity, tax information, and transfers involving other individuals or entities.
Financial Professionals Can Play an Important Role
Complex property cases frequently involve professionals outside the legal team.
Depending on the issues, forensic accountants, business valuation professionals, tax advisors, real estate appraisers, or other financial professionals may assist with identifying, tracing, or valuing assets.
Their role should be driven by the needs of the case.
A valuation professional may be necessary when the spouses disagree about the value of a closely held company. A forensic accountant may assist with tracing separate property or analyzing financial activity. Other professionals may be useful when an estate contains specialized assets.
Brad’s approach to high-level divorce and financial disputes includes working with appropriate financial professionals when their analysis is needed to understand the estate and develop the evidence.
Property Division Strategy Should Consider What Happens After Divorce
The consequences of a property division continue after the decree is signed.
A spouse receiving a business may retain an income-producing asset but also assume operating risk and liquidity constraints. A spouse receiving substantial real estate may have significant value on paper but relatively little cash. Retirement assets may have different tax characteristics from taxable investment accounts. A concentrated investment position may expose the recipient to market risk.
These considerations can affect settlement strategy as well as trial preparation.
For high-net-worth clients, the objective is not simply to obtain a particular percentage of the estate. It is to understand what is being divided, the strength of the legal and financial positions surrounding those assets, and how a proposed division may affect the client’s financial circumstances moving forward.
Appellate Considerations in Significant Property Cases
Property division decisions can also present appellate issues.
Characterization of property, the sufficiency of tracing evidence, evidentiary rulings, valuation disputes, and the exercise of the trial court’s discretion may become relevant if a judgment is challenged. Texas appellate courts have recognized that a trial court cannot divest a spouse of separate property by treating it as part of the community estate.
Brad’s substantial appellate background informs his approach to complex financial litigation at the trial level. Developing the record and preserving important legal issues can be significant in cases where a property ruling may ultimately receive appellate review. His broader appellate and complex family law practice includes matters involving property division and other sophisticated family law disputes.
Strategic Representation in High-Net-Worth Property Division
High-net-worth property division requires a clear understanding of both the legal framework and the financial structure of the estate. Business interests, separate property, trusts, compensation arrangements, investments, and real estate may each present different issues, and decisions concerning one asset can affect the strategy for the estate as a whole.
Brad M. LaMorgese is Board Certified in Family Law by the Texas Board of Legal Specialization and has decades of experience handling complex family law matters involving substantial assets and sophisticated financial issues. His trial and appellate background provides an additional perspective in cases involving contested characterization, valuation, and other significant property disputes.
To discuss a high-net-worth property division matter in Dallas-Fort Worth or elsewhere in Texas, contact LaMorgese Family Law at 214-295-7200.
Board Certified. Respected. Results-Driven.