Personal Injury Settlement Funds in a Divorce

One of the more confusing and misunderstood assets which may be part of the marital property division in a divorce are personal injury settlement funds.

In essence, once a spouse has received funds in a settlement (or to satisfy a judgment) stemming from a personal injury claim, those funds may be community property, separate property, or a mix of both.

Keep in mind that under the Texas Family Code, all assets owned by either spouse are deemed to be community property unless and until the spouse claiming that asset as separate property provides clear and convincing evidence that it is separate.  Therefore, absent any evidence to the contrary, all of those settlement funds will be considered community funds.

What do you need to prove to show that your personal injury settlement funds are your separate property?  Funds which can be shown by clear and convincing evidence to be payment for one or more of the following damages are considered separate property:

  • Mental Pain and Anguish
  • Physical Pain and Suffering
  • Disfigurement
  • Loss of a Spouse’s Love and Companionship

Funds for settlement of the following sources of damages, however, have been explicitly held by Texas courts to be community property:

  • Loss of earning capacity during marriage
  • Medical expenses incurred during the marriage
  • Damage to credit reputation
  • Other expenses associated with the injury to the community estate
  • Disability insurance payments and workers’ compensation benefits intended to replace earnings during the marriage

What if your settlement funds were paid in one lump sum, with various sources of damages all being paid out of one amount?  This is a very common occurrence.  When there is a lump sum settlement, it will almost certainly be characterized by a court as community property when it is intended to settle claims which include damages which are a mix of separate and community assets.

Therefore, if you are concerned that either you or your spouse may seek a divorce in the future, it is important to ensure that any settlement funds paid to you in a personal injury lawsuit are clearly segregated by the type of damages sought in your lawsuit.  Your personal injury attorney can help you structure a settlement which accomplishes this.

Who Are Your Beneficiaries After Your Divorce?

After a person goes through a divorce in Texas, they should have a task list of matters that must be handled soon after the divorce is completed.  Some are obvious, such as removing a spouse from bank accounts, changing names on deeds or titles, or perhaps even changing their own name immediately after the divorce.  An often forgotten task that should be on that list, however, is changing the beneficiaries on various insurance policies, retirement accounts and bank accounts.

Many newly divorced people (and sometimes even their attorneys) mistakenly rely on Texas law to protect them in this circumstance.  Someone might tell you, “It’s okay – Texas law prohibits your ex-spouse from being a beneficiary unless you re-designate them on the policy.”  That statement, however, doesn’t tell the whole story.

Section 9.301 and 9.302 of the Texas Family Code describes the effect of divorce on a life insurance policy (9.301) or a retirement or other financial plan (9.302) in the event the ex-spouse is a beneficiary.  In a nutshell, the designation is no longer effective unless you re-designate the spouse, if the spouse is a beneficiary under the divorce decree, or unless they are named as a trustee or beneficiary of a trust to which the benefits are to be paid.

Keep in mind, however, that unless the insurance company or plan administrator is advised of the divorce before benefits are paid out, your family could lose out on the ability to go after the insurance company or plan administrator for wrongfully recognizing the old beneficiary designation.  Sure, you could still go after the recipient of the funds, but that could be a much more difficult task than going after the company handling the policy or fund.

What is the lesson to be learned from this post?  First and foremost, a divorced spouse needs to review all of their retirement, insurance and other financial plans to ensure they know who the beneficiaries are and to change those beneficiaries to reflect who they wish to ultimately benefit from those plans in their event of their death.  If, however, that is not done in a timely manner, the alternate beneficiaries or the divorced spouse’s heirs need to notify the insurance company or plan administrators as soon as possible after the death of the divorced spouse in order to invoke the protections provided under the Texas Family Code.

To find out more about the effect of divorce on your insurance policy, retirement plan or other financial matters, contact our Houston divorce attorney, Bobby L. Warren, at 713-579-9702.

What is a Standard Possession Order?

Most of my new clients are often confused at first when we refer to a “standard possession order”?  What is it, exactly?  What makes it “standard”?

As the Texas legislature has further developed the Texas Family Code, they attempted to create a default possession order that courts would be obliged to implement unless there was evidence that a different schedule would be in the best interests of a child.  Hence, the standard possession order was born.

In essence, under Texas law, the standard possession order is deemed to be the minimum amount of time of possession for a non-primary conservator (the parent who doesn’t determine the residence of the child) which is in the best interests of the child.  In other words, absent some evidence to the contrary, once a court determines who a child is living with on a regular basis, the court must award the other parent, at a minimum, the custody schedule contained in the standard possession order.

That does not mean, of course, that the court cannot hear evidence that less access and possession would be in the child’s best interest.  If a parent shows an inability to care for a child for an extended period of time for whatever reason, a court could choose to curtail that time.  On the other hand, if a parent presents evidence that more time with the non-primary conservator would be in the child’s best interests, time above and beyond a standard possession order may be awarded.

So what sort of schedule is implemented in a Texas standard possession order?  Initially, we should examine the weekend possession.  Under a standard possession order, a conservator is awarded access and possession on the weekends following the first, third and fifth Friday of each month.  If you look at a calendar and focus solely on the Fridays on that calendar, you will see either four or five Fridays.  If a month has four Friday’s, the conservator with a standard possession order would have the child on the weekends following that first and third Friday.  Generally, about four months out of every year have a fifth Friday (2016 is one of those odd ducks containing five months with a fifth Friday), allowing the non-primary conservator an extra weekend.  You should note that this creates a situation where the fifth Friday is immediately followed by the first Friday of the following month.  This does provide a conservator under a standard possession order back-to-back weekends of access and possession of the child.

In addition, the non-primary conservator will generally have time on Thursday evenings throughout the school year.  Why only during the school year?  This restriction is put in place in order to avoid the conflicts that these Thursday periods of possession would inevitably have with various holiday periods of possession, as we will investigate further below.

For holidays and school vacations, the schedule usually varies depending on whether it is an even or odd year.  Parents generally alternate Spring Break and Thanksgiving vacation by even and odd years.  Christmas vacations is split in half (with the exchange occurring at Noon on December 28), with parents getting either the first or second half of the vacation depending on whether it is an even or odd year.  Finally, the non-primary conservator will generally get 30 days with the child in the summer, either to be taken all at once or divided up into two periods of possession, with some restrictions.

Finally, it should be noted that a slightly different schedule applies for conservators who reside more than 100 miles from one another.

Keep in mind that this is not an exhaustive look at the standard possession order – this is merely a primer on the concept of a standard possession order.  If you have questions about implementing a standard possession order, or perhaps modifying your own possession order, feel free to contact our Houston child custody attorney, Bobby L. Warren, at 713-579-9702.

Protecting Small Businesses in a Texas Divorce

One of the more complicated property issues in any Texas divorce is how to value and account for a small business owned by one or both spouses.  Unfortunately, many business owners don’t consider the impact of a divorce on that business until it is too late.

The most common and most effective means of protecting a small business in a Texas divorce is to enter into prenuptial agreements and postnuptial agreements in order to clarify the rights of the spouses in regards to the business.  With a prenuptial agreement, you can make clear that the business is to remain the separate property of the spouse who owns it.  More importantly, however, the business owner spouse can also seek to eliminate the right of either spouse to claim a right of reimbursement.

As I’ve discussed elsewhere on this blog, reimbursement is a claim made in Texas divorces which allows one marital estate (such as the community estate) to claim from another marital estate (for example, the separate estate of the business owning spouse) some form of reimbursement for increased value in the separate property business due to investment in the business with community funds or, more commonly, due to some other risk or detriment the community estate suffered in order to benefit the business owner’s separate estate.  The commonly occurs where a business owner obtains a loan on behalf of the business which includes a personal guarantee.  Most personal guarantees are written in such a way where community assets are risked in the event the business cannot meet its loan obligations.  While there may be no actual loss by the community estate, it may give rise to a reimbursement claim if the value of that risk can be ascertained.

In addition, in many small businesses, all taxes owed due to the profit from the business passes through to the owners.  The owners then pay personal income tax on the income they receive from the business in lieu of the business being taxed on the profits.  It is possible, in some circumstances, for the community estate to claim a right of reimbursement for the taxes paid on that income which would have been attributable to the small business otherwise.

In all circumstances, a properly written premarital agreement could protect against such claims.

A postnuptial agreement can also assist with changing the rules regarding income from the separate property business.  Many business owners do not realize that income from their separate property is generally defined to be community property.  A properly written postnuptial agreement can change that default rule to allow all income from the separate property business to be defined as the separate property of the spouse who owns the business.

Prenuptial agreements and postnuptial agreements are but just a few ways in which small businesses may be protected in a Texas divorce.  If you would like more information on how you can protect your business, contact our Houston divorce attorney, Bobby L. Warren at 713-579-9702.

Creative Use of Texas Temporary Orders

In my experience, temporary orders are one of the more underutilized tools available to parties going through a divorce in Texas or perhaps struggling with a child custody dispute in Texas.

In essence, temporary orders are exactly what they sound like – orders made by a Texas court on a temporary basis in order to provide some stability and predictability while a case is still pending.  When I say that such orders are “underutilized”, I don’t necessarily mean that parties don’t seek them when they should.  Instead, I mean that people don’t fully appreciate all of the options available in temporary orders.  While there are the obvious provisions concerning conservatorship, access and possession, as well as child support, there are other provisions available for use in temporary orders.

For example, temporary orders can often be used in order to cause a divorce or child custody matter to move along more quickly than it would without such orders.  In Harris County, Texas, depending on the family court you’re assigned to, it often takes several months after your filing date to receive a trial date. That trial date will likely be scheduled anywhere from 3-6 months out.  As any Houston divorce attorney will tell you, that trial date will likely be reset for another 90 to 120 days unless the parties have reached a settlement.  “Why?” you may ask.  Due to the substantial volume of cases in Harris County family courts, divorce and child custody disputes generally become backlogged, with the older cases taken up for trial before the newer ones.  The courts hope that by setting a trial date sooner, the parties will be encouraged to settle sooner.  If they do not, the court simply resets the trial date once its two week trial docket is full of the older cases.

How, then, can you as a litigant in this process, move the case along more quickly?  By proposing and entering into temporary orders with the other party, you can agree to be ordered to mediation well before the trial date.  Obviously, you will want to collect information you need in order to evaluate the marital property, as well as identify and value community assets.  Temporary orders can assist you with that task as well by establishing temporary orders which require the parties to exchange a sworn inventory and appraisement within a specified period of time (60 days is customary).  By requiring an early exchange of inventories, coupled with mediation shortly thereafter, you substantially increase the chances of settling a divorce case within a few months instead of waiting nearly a year to be called to trial.

In addition to inventories, parties can agree to exchange other documentation as part of temporary orders.  One very common set of documents ordered produced as part of temporary orders are income tax returns and paycheck stubs.  These are essential to establishing the amount of child support to be paid by the non-possessory conservator.

Finally, temporary orders can also be used to order the sale of certain assets before a divorce is final.  Most commonly, this means the sale of the marital residence.  Too often we purchase homes assuming the best case scenario – the continuation of a happy, healthy marriage.  When this plan doesn’t go as intended, my clients often find themselves with a home they cannot pay for themselves.  Selling the home is a frequent solution to this problem.  I have often drafted temporary orders which provide for the orderly and fair sale of the marital residence, with the proceeds divided up between the parties in a fair and equitable manner.

If you’re wondering whether seeking temporary orders are appropriate for your particular case, give our Houston divorce attorney, Bobby L. Warren, a call at 713-579-9702.

What does “full custody” of a child mean under Texas law?

All too often, people throw around phrases about child custody and mean very different things by those phrases.

“I want full custody of my child.”

What, exactly, does that mean?  Fortunately, in Texas child custody disputes, we have much more precise language than simply “full custody” or “joint custody”.

For starters, we have to make a distinction between two concepts:  conservatorship and possession.

Conservatorship refers to the rights of one person to make decisions on behalf of another due to a legal incapacity.  Under Texas law, when we speak of conservatorship, we are usually referring to the right of an adult (the conservator) to make decisions on behalf of a child.  Children, of course, do not have the right to legally make decisions on their own behalf until they reach the age of majority or are otherwise emancipated.  By default, parents have the right to act as conservators for their children.  What happens, however, when those parents split up or divorce?

Generally, under Texas law, it is presumed to be in a child’s best interests that parents of that child be named Joint Managing Conservators.  In short, this means that the parents, to some degree, share in the responsibility of making decisions on behalf of their children for matters such as the education, medical care and management of the child’s finances.  The vast majority of child custody orders name the parents as Joint Managing Conservators.

The alternative to Joint Managing Conservatorship is called Sole Managing Conservatorship.  When a parent is named as a Sole Managing Conservator, it means that parent has the sole right to make decisions on behalf of the child.  The other parent would be named a Possessory Conservator, which means that they make no decisions concerning the child.  Instead, a Possessory Conservator generally only has rights to possession of the child pursuant to a possession order and the right to receive information about the child’s wellbeing.  It is uncommon for a parent to be named a Possessory Conservator instead of a Managing Conservator.  Generally, the burden of overcoming the presumption of Joint Managing Conservatorship being in the child’s best interest is a difficult hurdle to overcome.  Often, parents who have been named Possessory Conservators have demonstrated a substantial lack of good judgment in some fashion.

When a parent says they want “full custody”, do they mean that they want Sole Managing Conservatorship?  Sometimes.  In other instances, they may mean that they want to deny the other parent any form of possession.

Possession and access of a child refers to the superior right to have physical possession of the child.  Obviously if two parents of a child have split up or divorced, they cannot reasonably have possession of a child at the same time.  Instead, some form of order must be entered in order to determine who will have possession of the child, and when that possession will occur.

Is it possible for a parent to be denied any access to a child whatsoever?  It is extraordinarily rare.  The circumstances which would give rise to a court denying any and all access of a parent to a child are usually the same circumstances which would give rise to potential termination of a person’s parental rights.  Because parental rights in Texas are considered to be a fundamental right, it takes an extraordinary set of circumstances to arrive at this point.  For example, if a parent abandons a child without the intent to return, that may give rise to a denial of a right to possession.  Other instances may include physical or sexual abuse of a child, placing the child in physical danger, or causing the death of another child or of the child’s other parent.  Obviously, all of these are very extreme situations.  This, however, demonstrates how difficult it is to completely deny a parent possession of a child.

Other measures may be taken in order to protect a child from a parent that has more moderate problems, such as alcoholism, a problem with drug abuse or  a mental health issue that is not easily controlled through therapy or medication.  For instance, the times and conditions of possession may be restricted.  Supervised visitation is often used in instances where the parent may pose a danger to the child’s physical or emotional wellbeing if left alone with the child.

When a parent says they want “full custody”, that leaves the door open to a myriad of interpretations.  By examining that parent’s concerns and getting to the root of the issue, we can generally suggest and advocate for conditions and restrictions that can protect the child and provide the parent with the peace of mind they desire.

If you have further questions about child custody issues, please contact our Houston child custody attorney, Bobby L. Warren, at 713-579-9702.

How to Prepare for a Divorce in Texas

While going through a divorce in Texas is never a completely seamless process, there are a few steps you can take in order to make the process a bit easier.

Much of the preparation for a divorce is centered on collecting documents and preparing yourself financially.  First, you should attempt to gather as many of the following documents as possible:

  • Income tax returns for the last five years
  • Income reporting statements (W-2, 1099, K-1, etc.) for both you and your spouse for the last five years
  • Paycheck stubs for both you and your spouse for the last three months
  • The three most recent statements for all debts owed by either you or your spouse
  • The most recent statement for any retirement funds (401k, IRA, etc.) owned by either you or your spouse
  • Any Social Security Administration statements for you or your spouse
  • Any deeds and closing files for any real estate owned by you or your spouse
  • Any titles for any vehicles owned by you or your spouse
  • Any appraisals of any property owned by you or your spouse

While this list is not exhaustive, it is a good starting point for evaluating the various marital estates involved in your divorce.  If you cannot obtain copies of these documents prior to filing your divorce in Texas, that is fine as well.  Most of these documents can be obtained from your spouse or from third parties once the divorce proceeding have been initiated in a Texas court.

In order to prepare yourself financially for a divorce, you should ensure you have sufficient funds to pay for attorney’s fees.  It is very difficult to judge exactly how much your divorce may cost, particularly at the very beginning.  If you anticipate a fight from your spouse from the very beginning, you should be prepared to have between $5,000 and $10,000 before filing for divorce.  This is particularly true if you have children.  If you anticipate reaching an agreement early on, $2,000 to $3,000 should be sufficient.  Also, don’t assume that you will not need more funds later on.  Begin making plans now for the possible need to pay more attorney’s fees later on.  Many of our Texas divorce clients find that having a very frank discussion about your finances with family and close friends can often lead to the financial assistance you need in order to make it through this very tough time.

Also, if you maintain a joint bank account with your spouse, open up a new checking account early on.  If you receive your paychecks from your employer by direct deposit, find out what process is required in order to redirect your paychecks to a different account.  Ensure that by the time you file for divorce in a Texas court, your paychecks are going to the new account to which your spouse has no access.

A critical mistake some parties make early on in divorces in Texas is leaving their spouse with absolutely no funds in joint bank accounts.  Generally, you should only take from the account what you will need in order to meet your immediate financial needs, including renting a new home and paying a retainer to your attorney.  Courts do not look kindly upon parties who take all of the money and run.

If you have questions about how you can properly prepare for a divorce in Texas, just give our Houston divorce attorney, Bobby L. Warren, a call at 713-579-9702.

The Heavy Costs of the “Bulldog” Divorce Lawyer

Prospective clients often ask me what sort of lawyer I am:  a high conflict lawyer or a reconciling lawyer.  Of course, they don’t use those terms.  Many times, they ask if I am “aggressive” or “a bulldog”.  Ultimately, what they really want to know is whether I’m going to give them the emotional satisfaction of running their spouse through the proverbial ringer.

Such a stance, however, comes at a cost, both financially and emotionally.  An overly aggressive attorney in a Texas divorce or child custody matter can make it difficult to work out agreements or avoid the need for court appearances.  As attorneys are required to appear in court more often and to do more work to achieve a desired result, the client often finds the cost of their divorce also growing exponentially.

Can a client’s goals be accomplished without resorting to overtly aggressive tactics?  The answer is almost always, “yes.”  On a rare occasion, I come across other attorneys who are being unreasonably aggressive or may overestimate the strength of their client’s case.  Sometimes some aggression in response may help bring such a person in a Texas divorce to the negotiating table when the relative weakness of their case is exposed.  Often times, however, clients find that there is a substantial benefit to working with the other side, collecting information in an efficient and cost-effective manner and making realistic demands of the other side.  In the end, their case takes far less time and the amount spent on attorney’s fees is much lower.

More importantly, however, taking an aggressive stance in a divorce when it is not called for can leave an emotional toll on the parties involved, as well as their children.  Spouses in a divorce often forget that their children can sense when there is conflict between their parents.  This can cause children to perform poorly in school, misbehave or develop social issues which may impact them for many years.  Resolving Texas divorces and Texas child custody conflicts quickly and amicably can minimize the emotional impact on children and the parties involved.

If you are seeking a Houston divorce attorney or Houston child custody attorney who takes a reasoned and balanced approach to such cases, give our attorney, Bobby L. Warren, a call at 713-579-9702.

An Unusual Claim of Hidden Assets in a Divorce

Fridays are always a good time for blog posts with a bit of humor.  I previously discussed the importance of having an inventory in a Texas divorce in order to catalog assets, and some of the techniques Texas attorneys may use to find hidden assets when they aren’t voluntarily disclosed.  I’m not sure I would be prepared for this particular omission from an inventory, however.

A wealthy hedge-fund boss is suing his poker-pro ex-wife for a reason that would be like a stiletto to the heart of any pump-crazy New York gal — her shoe collection.

Daniel Shak claims Beth Shak never told him about her stockpile of 1,200 pairs of designer shoes when they divorced three years ago.

The finance titan, who had shared a Fifth Avenue pad with Beth, claims that she hid the collection from him — possibly in a “secret room” — and that its value may entitle him to hundreds of thousands of dollars more in their divorce settlement.

While it may seem petty to argue over a bunch of shoes, the husband in this odd scenario estimates the shoe collection to be worth approximately $1 million.  That’s a lot of very expensive shoes.

No matter whether we’re talking about designer shoes or stock in a designer shoe company, it is important to protect yourself as much as possible from such omissions.  An inventory gives you a great starting point in a Texas divorce in order to ensure that both spouses are making a full disclosure as to all of their assets.  In the event a spouse fails to disclose certain assets in an inventory, Texas law allows the innocent spouse to ask for a division of that asset.  In some cases, a Texas court can determine whether the failure to disclose the asset was willful, thereby allowing the court to award a disproportionate share of that asset to the innocent spouse.  Without an inventory, however, it becomes much more difficult to prove a failure to disclose, much less a willful failure to disclose.

If you’re concerned about whether you have full disclosure of assets in your divorce, contact our Houston divorce attorney, Bobby L. Warren, at 713-579-9702.

Interference with Child Custody in Texas: Civil or Criminal Matter?

Although we often think of interference with child custody to be purely a civil matter, as one Texas state lawmaker found out recently, it’s both:

State Rep. Armando “Mando” Martinez was indicted in a bitter, child custody dispute with an ex-wife who once filed to run against him for office.

Martinez, D-Weslaco, surrendered to law enforcement authorities Friday on an interfering with child custody charge and was then released on a personal recognizance bond, his attorney, Fernando Mancias, confirmed Monday. Martinez has been embroiled in an extensive child custody battle with his ex-wife, Jessica Reyes, over a visitation schedule for their son, Kuentin.

Clients often ask me whether they can call the police if the other parent somehow violates the child custody order by not turning their child over to them.  The problem with the question is that there is a difference between what the law says and how it’s enforced.  Generally, most law enforcement officers do have the power to enforce a Texas child custody order.  Many law enforcement officers, however, are reluctant to get involved in such disputes.  The universal line my clients hear from the officer is, “This is a civil matter.  Talk to your attorney.”  We usually then plan on filing a motion to enforce the order.

This news story, however, illustrates an instance where criminal charges can be used:

Although the Weslaco police officers responded to the initial complaint, the Hidalgo County District Attorney’s Office took over the case.

District Attorney Rene Guerra said he presented the case to a grand jury after Reyes approached him about numerous complaints she’s made over noncompliance with visitation rights. Guerra said Martinez was not allowing visitation on the dates that were assigned by the court order.

But he said prosecutors pursued the issue — rather than sorting it out in family court — because of a lack of progress on the case. Court records indicate an extensive legal battle between Reyes and Martinez, spanning several cases and eight years.

“A lot of the judges are not doing their job,” Guerra said. “There’s too many people saying too many things in the courtroom, and sometimes judges don’t want to decide.”

The candid nature of the district attorney’s assessment of the family courts here is very surprising.  I doubt we have reached this point in Harris County, but the lesson to be learned here is that criminal charges are a tool that can be used.  Whether it is used or not often depends largely on the priorities of law enforcement and prosecutors.  In the meantime, however, a good Texas child custody attorney can assist you in resolving your child custody disputes through civil tools, such as motions for enforcement.

If you have a Texas child custody dispute, contact our Houston child custody attorney, Bobby L. Warren, at 713-579-9702.