Custody of Your Pet in a Divorce

May 8, 2008

Many couples, because of age or by choice do not have children- at least the two legged type.  For many couples, their beloved pets are considered their “children”. 

This is why when divorce comes along, parties can feel just as much anxiety, concern and apprehension as they would in a divorce proceeding involving a child.  However, the courts handle pets much differently than children and so some thought into the issues of  “custody” of Rover, Fluffy or Polly is needed.

Here are some basic issues to consider in a Texas divorce involving pets:

  • No matter how much you may feel that your pet is a member of the family, Texas courts consider animals as property only.
  • As property, the community property rules apply to your pet.  Therefore your pet is subject to being given to either you or your spouse.  The only exception is if you can prove that your pet is your separate property.  Generally you can only prove this if you (1) owned your pet prior to being married (bills of sale, vet bills dated prior to marriage etc. may be helpful here); (2) your pet was given to you as a gift during the marriage (hard to prove); and (3) your pet was willed or bequeathed to you (such as a long lived parrot willed to you by your aunt);
  • If you have a valuable pet (such as a horse, purebreds, or show animals) it will considered as a valuable asset.  If the parties cannot agree to the custody of the valuable pet, the judge could order that the animal be sold and the proceeds divided according to what the judge thinks is fair.  This “King Solomon” type of solution may be to neither party’s desire.

Although your pet is legally considered property, you may want to consider using a “best interest of the animal” standard in trying to negotiate with your spouse.  This may mean that you should be willing to give up your pet if it is your pet’s best interest.

  • Talk with your spouse about the pet to see if you can work out an agreement.  This is usually will be better than going to court and have a judge (who may not be an animal lover and has little patience for such “quibbling”) ruling in a way neither of you want;
  • If you do have minor children (human), who have formed an attachement with the pet, consider letting the pet go to the parent who has primary custody of the children;
  • If there are more than one pet, consider not dividing them between the spouses.  Pets, even of different species, often form packs.  Breaking the pack can cause depression and anxiety for the animals;
  • You can work a custody arrangment for visitiation just like done with children.  However, many judges will not take the time to make such a ruling.  You have to do this by agreement and have your attorney draft it up so it is legally binding.

If you absolutely cannot work our custody of your pet with your soon to be ex-spouse you will have to fight over Rover in court.  Here are some tips to keep in mind:

  1. Be sure to tell your lawyer early on in the case how important your pet is to you.  Your lawyer may not understand that this is a priorty for you unless you tell him or her.
  2. You should be prepared to show the court that you are the person best able to take care of your pet.  Some ways of doing this may include-
  • show you have more time to play with your pet;
  • show you are in better health or habit to exercise your pet;
  • show you have been the one to groom it, take it to the vet, etc.  You may even have your vet testify about your ability to take care of the pet;
  • show you have more space for your pet (particularly if it is a large animal that needs space to run).

Also, you need to find out early from your attorney how they feel about your passion for your animal.  Some lawyers will not want to deal with your special issues.  Try to find an attorney who is both sympatheic to your special attachment and yet practially minded about how to resolve the issues for both your interest, and your pets best interest.

 

 

  


Rebutting the Community Property Presumption

February 6, 2008

Often times a party in a divorce wishes to have the court affirm the separate nature of a particular piece of property.  They must therefore overcome the presumption set up by the Texas Family Code that all property in a marriage is of a community nature.

     “Clear and Convincing Evidence” must be presented to rebut the community property presumption.  (TFC 3.003).  see McKinley v. McKinley 496 SW2d 540, 543 (Tex. 1973).  The standard requires that “a reasonable trier of fact could have formed a firm belief or conviction that its finding was true.”  Stavinoha v. Stanivoha, 126 SW3d 604.  To prevail in court, a party generally must produce not only testimony, but also documentary evidence of the separate nature of community property.  See Boyd v. Boyd, 131 SW3d 605. 

     The evidence to rebut the community property presumption should establish the time and manner it was acquired.  This is known as the “inception of title”.  The evidence should also any mutations that may have happened to the property during the marriage.  This is known as “tracing”.  In tracing, small gaps in establishing a property’s nature through time will not necessarily prevent a party from proving the separate nature. See Faram v. Gervitz-Faram 895 SW2d 839.  In that case, evidence was found to be sufficient to establish the separate nature even though the records on the investment account were incomplete.  The party must show enough evidence to convince the trier of fact to form a firm belief or conviction of the separate nature.


Professional Organizers Can Help In Texas Divorce Cases

January 24, 2008

One of the most dreaded aspects of divorce from a client’s point of view may be in completing the inventory and appraisement.

The “I&A” is a sworn statement of all the assets and liabilities owned by the community estate or either party to a suit.  The filing of an inventory by each party prior to trial is mandatory in Galveston and Harris counties, (where the author practices family law) and likely in most other counties in Texas.   The  I&A is the blueprint upon which the property division of a divorce is built .  It is also the basis of any detailed mediation or negotiations in which property is an issue- the parties will use the inventories to divide the property.  The document is a complete listing of not only the property, but what the parties think the value of the property is.  It is also an impeachable document in any adversarial hearing. 

For these reasons, the Inventory and Appraisement is one of the most important pieces of documentary evidence in any divorce- even those with only minor property disputes.  The parties must therefore put a lot of careful attention and detail in the inventory.  Obtaining account numbers, charge balances and other financial information for the inventory is difficult enough.  But for most people, the most intimidating parts of the inventory preparation is trying to catalogue all the “stuff” accumulated over a five, ten, or thirty year marriage. 

Most inventories do not require detailing anything with a value of less than a certain dollar amount (it is assumed the parties will divide such property themselves because the cost of litigating over these items is more than the items themselves are worth).  However, particularly in medium to high net worth families, there can be considerable assets spread throughout a home, in curio cabinets, in attics and in storage units.  Most people do not have a good idea of everything they own, let alone a detailed list and estimated value that is required to prepare an inventory. Some clients are so intimidated by the large task of cataloguing their valuables, that they give up the items in the divorce simply because they don’t have the time or energy to do all the necessary work.

Luckily, help is available through the National Association of Professional Organizers.  According the their website at www.napo.net, “A professional organizer enhances the lives of clients by designing systems and processes using organizing principles and by transferring organizing skills. A professional organizer also educates the public on organizing solutions and the resulting benefits. NAPO (pronounced NAY-poh) currently has close to 4,000 members throughout the U.S. and in 8 other countries.”   A search of their member database revealed 21 NAPO members in the Houston area.

I recently met one NAPO member, Judson Crowder.   Judson, after 9 years working in Hollywood organizing the packing, storage, and retrieval of set pieces (most notably with the show “Everybody Loves Raymond”) has returned to Houston to start his own his service company: Restorganize, LLC. (www.restorganize.com)  As part of his services, he organizes and inventories all items in a home or storage unit.  If you require your items to be put in a certain place for easy access, Judson will do that.  But more importantly for the divorce case, Judson creates a catalogue binder which details all the specifics of your individual pieces of property.  The binder includes a color digital picture, category of the item, and any other details needed. 

Such a catalogue binder could be an invaluable part of a divorce inventory or otherwise used as evidence for trial or mediation.  In a snapshot it allows the judge, mediator or party to see what is being argued over. 

Naturally, such services are not warranted in all cases.  The costs of this service (which can range between $50 to $100 per hour or more and take one or more full days depending on the volume and location) must be weighed against the value of the items to be inventoried.  However, Judson’s and other professional organizers’ services can take the drudgery out of this part of the discovery process in a Texas Divorce.   In medium or high asset cases, such services may be the difference in achieving a fair division of the property.  


Goodwill As Property In a Texas Divorce

May 4, 2007

Goodwill is the intangible, but valuable good reputation that a business builds up over the years. In a Texas divorce in which one of the community assets is a business or partnership, the value of the business goodwill should be considered as an asset that deserves consideration in the property division in the Texas divorce.

Goodwill in Texas is only considered an “asset” if it can be separated from a particular person. If the business is a solo practice such as the professional business of a doctor, lawyer or accountant, the goodwill must exist separate from the individual. Nail v. Nail, 486 SW2d 761.
In situations such as a law practice, the court will not recognize the existence of goodwill unless the person asserting the goodwill presents some evidence that it exists apart from the professional. Hirsh v. Hirsh 770 SW2d 924.
Texas courts have held that where one person does not do all the work themselves, a business could have goodwill apart from the person. Finch v. Finch 825 S.W. 2d 218.
Goodwill that exists separate and apart from a professional’s personal skills, ability and and reputation is divisible on divorce. Rathmell v. Morrison, 732 SW2d 6.
An attorney trying to prove the existence of business goodwill in a Texas divorce has a difficult task, and will likely have to rely on the expert opinion of a professional business appraiser. And in most instances, there is no practical way to divide goodwill. Seeking an offset from other property is the viable solution. If no such property exists, a money judgement and.or lien against the some tangible asset may be the only other alternative.


Dividing Assets In A Texas Divorce- Memberships

April 30, 2007

Courts cannot divest a spouse from membership in an organization such as country clubs and other groups and award it to the other spouse.  Cluck v. Cluck, 647 SW2d 338: 

Since the membership stock has a contingent redeemable value of $1,000.00, the trial court could and did take into consideration this as an asset of the community in dividing the community estate of the parties. However, we are of the opinion that the trial court had no authority to divest the appellee of membership in the club. We view the stock certificate as merely an indicia of the right to membership analogous to a membership card in any voluntary association, and personal only to the appellant. Courts have been reluctant to interfere with the internal management of a voluntary association.”

 

However, the courts can value the memberships and reapportion the division of the estate to take the value of memberships into account.


Memberships as a Marital Asset In Texas Divorces

April 15, 2007

Memberships such as inclusion in exclusive country clubs can seem to be confusing, but how to divide them is relatively simple.  The court does not have the power to grant membership in an organization to anyone.  Membership qualifications are in the power of the club, not the court. (See, Cluck v. Cluck, 647 SW 2d 338).

 However, this should not confuse the issue that the membership still may be considered of great value.  Therefore, the nonmember may be entitled to the award of other property to equalize the value of the membership in the community property division.


A Houseboat is Not a Homestead In Texas

March 7, 2007

The recent case of Norris v. Thomas says that “a motorized waterborne vessel, used as a primary residence, and otherwise fulfilling all of the requirements of a homestead, except attachment to land, does not qualify for the homestead exemption under Article 16, §§ 50 and 51 of the Texas Constitution.” The proper test for whether a residence attains homestead status is whether the attachment to land is sufficient to make the personal property a permanent part of the realty. Significantly, both the Constitution and the Property Code use the word “thereon” when describing any protected homestead improvements; the Constitution also stipulates “on the land,” which is plainly not the same as “in the water.”

Homestead. Requirements for Qualification.
In order to qualify as a homestead, a residence must rest on the land and have a requisite degree of physical permanency, immobility, and attachment to fixed realty. A dock-based umbilical cord providing water, electricity, and phone service may help make a boat habitable, but the attachment to land is too slight to warrant homestead protection.

Homestead. A House Can Be A Homestead As In Improvement To Unowned Land.
A house can be a homestead even if the owner has no ownership interest in the land. The term “improvements” as protected by article XVI, section 51 includes the residence itself. The term “improvements” to real property is distinguished from mere personalty. Personalty does not constitute an improvement until it is annexed to realty. There can be no improvement without annexation to realty, and until personalty is annexed to realty, it by definition cannot be an improvement. Not only that, but the annexed object cannot be deemed an improvement to land unless it is intended to be a permanent addition to the realty. Homestead protection turns not on who owns the underlying land, but on the degree to which the residence “thereon” or “on the land” is attached to it.


Life Insurance As a Marital Asset In a Texas Divorce

December 3, 2006

Are insurance policies generally characterized as separate or community in a Texas divorce?

Texas follows the inception of title rule in classifying the proceeds from a life insurance policy. Ownership is established by the source of funds for the initial premium. If that premium was paid before marriage or with funds clearly traceable to separate property, the policy remains separate property even though some or all subsequent premiums are paid with community funds. This means that the full value of the life insurance proceeds will be includable in the deceased spouse’s gross estate for federal estate tax purposes. The surviving spouse, if not named beneficiary, has not claim to any of the proceeds. However, the community estate has an equitable claim for reimbursement in the enhanced value of the policy attributable to payment of premiums with community funds.

Ordinary value and term life insurance with guaranteed renewable and guaranteed convertible features are covered by this rule. The insured can convert the term policy to an ordinary value policy at any time. Furthermore, the insured needs no proof of insurability to renew the policy.

For example, in Estate of Cavenaugh v. Commissioner, the insured’s policy was considered an option contract, and the future payments related back to the initial acquisition of the contract. The court applied the time of acquisition rule stating that the insured’s subsequent actions could to convert the character of the property.

First Premium From Community Funds
If the initial premium was paid out of community funds, the life insurance policy is a community asset. One-half the insurance proceeds are includable in the deceased spouse’s gross estate for federal estate tax purposes. If a third person is named beneficiary of a community owned life insurance policy, this action may be challenged by the surviving spouse under the rules governing lifetime transfers. If naming the other person is found to be a fraud on the surviving spouse, the spouse will be awarded one-half the death benefits and the named beneficiary will be entitled to receive the deceased spouse’s one-half interest in the proceeds.

Note, however, that there is no basis for asserting an equitable claim for reimbursement in the policy’s enhanced value if the spouse is unsuccessful in a “fraud on the spouse” challenge, because community funds were expended on a community asset. An equitable claim for reimbursement arises only if financial contributions from one estate enhance the value of another estate (i.e., community funds enhance separate property or vice versa). Contrast this result if the spouse had paid the first premium on the policy with funds from an inheritance. This would result in the policy being separate property, and as such the community estate would have an equitable claim for reimbursement in the enhanced value of the policy attributable to the payment of premiums with community funds.

Policy Acquired After Marriage But While Domiciled In Common Law State
Suppose a life insurance policy is acquired after marriage but while the couple was domiciled in a common law state, and the couple later moves to Texas. In determining the rights to proceeds at divorce, the policy is considered quasi-community property and is community.

Computation of Equitable Claim For Reimbursement
Since the insured on a life insurance policy is not required to pay the premiums, payment of premiums is not considered a discharge of debt. Thus, the use of community funds to pay life insurance premiums is measured by the enhanced value test in relation to the contribution of spousal labor to separate property.

(1) growth of a policy’s investment feature
One way to measure the enhanced value would be to measure the growth of the policy’s investment feature (i.e. the cash value). Problems arise, however when using this approach with non-cash value term insurance policies, or when both separate and community funds have contributed to the growth.

(2) Prorate according to premiums paid.
Another approach would be to prorate the proceeds in proportion to the source of the funds that paid the premiums, (i.e., if 40% of the premiums were paid from community property funds, then the equitable claim for reimbursement added tot eh community property would only be 40% of the growth). However, this proration method has been rejected by the court in McCurdy v. McCurdy, 373 SW 2d 381 (Tex.Civ. App. 1963). In this case, the court chose to apply the inception of title rule due to its inherent simplicity and in order to ensure an equitable distribution. The inception of title rule grants the spouse a right in the proceeds from the date of the policy.


Property IV: Classification of Particular Assets

December 3, 2006


Now that we have gone through some general classification principals, we can look at some specific applications.

Most questions of “is it yours or is it mine” are simple to figure out. Texas marial property can be classified in most cases simply by applying the meaning of Texas Family Code 3.001. The section states that a spouse’s property consists of : (1) the property owened or claimed by the spouse before the marriage; and (2) the property acquired by the spouse during the marriage by gift, devise, or decent; and (3) the recovery for personal injuries sustained by the spouse during the marriage, except any recovery for loss of earning capacity during the marriage.

However sometimes classification is a little more complex. What follows are some general principals and likely outcomes of classifing certain property as separate or community. However caution must be used in applying these principals. Certain facts may change how the property is characterized. Remember, as I keep saying in this blog, any person should consult with an attorney prior to making any decisions based on any information obtained in this blog. This blog is for educational (and maybe entertainment) purposes and is NOT LEGAL ADVICE! Ok, enough said. Let’s look at some specific assets begining with the next post..


Property III: Mutations

November 9, 2006


Changes in the form of an asset are referred to as “mutations”.

For example, let’s say that Mary owns a house prior to marriage. She then marries John. As we have discussed, the house is clearly the separate property of Mary.

Now assume that after the marriage she sells the house and purchases two giant atomic ants. She then sells THEM to a circus sideshow and with the proceeds, buys stock in Atomic Widgets Inc.

We say that the house “mutated” into Atomic stock by the subsequent transactions of Mary.

The interesting thing about mutations is that under Texas law, the characterization, does not change. The fact that the property is the separate property of Mary is not changed by the fact that the property changes in type over time and through various sales. As long as the proceeds from the sale of separate property are used to purchase other property, the new property retains the separate property character. Of course, as we have previously mentioned , the spouse trying to prove the separate nature of the property has the burden of proving that it is not community. However, this can be done if there are records to trace the assets.

Another interesting thing about mutations is that even if the value of the mutated asset goes up, it still retains it’s character. So in our example, if the Atomic Widgets stock goes up and are not other wise sold during the marriage, then the increased value of the stock is still all the separate property of Mary.

Although any dividends or other payouts from the stock are considered community, (because such payouts are much like “income” from the stock), the stock themselves (and their increased price) are still Mary’s separate property.


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