What Is Fraud on the Community in a Texas Divorce?

 Posted on December 30, 2021 in Divorce

When a couple chooses to end their marriage and get a divorce, disputes related to property division can become complex and contentious. Spouses will be required to divide all of their marital assets and debts, and disagreements about how to do so can be difficult to resolve. However, matters can become even more complicated if one spouse is accused of hiding assets in an attempt to avoid sharing them with the other spouse. In Texas, this is known as “fraud on the community,” and a spouse who is accused of committing this form of fraud may face consequences.

Addressing Issues Related to Hidden Assets

Community property consists of all assets and debts that a couple acquired during their marriage. This property must be divided between the spouses in a manner that is fair, ensuring that each party will have the necessary financial resources going forward. However, there are a variety of ways that a spouse may attempt to conceal assets in hopes that they will not have to share them with the other spouse. Methods of doing so may include:

• Physically hiding money or property - A spouse may conceal cash in certain locations, such as a safe in their home, a safety deposit box at a bank, or other hiding spots. They may also use marital funds to purchase valuable items such as artwork or jewelry and then undervalue these items during the divorce process.

• Paying false debts - A spouse may attempt to transfer assets to someone else, such as a friend or family member, with the intent of receiving these assets back after completing their divorce. In many cases, a person will claim that these transfers are payments for money owed to someone else.

• Delaying business deals or tax refunds - A spouse who is a business owner may undervalue business assets and fail to account for the expected increase in value of these assets in the near future. This may be done by waiting to complete lucrative deals until after completing the divorce process in order to avoid having to share the proceeds of these deals with the other spouse. A spouse may also overpay business taxes so that they can receive a large refund after completing their divorce.

If a spouse attempts to conceal assets or takes other actions that deplete the value of the marital estate, this may be considered fraud on the community. When addressing this issue during the divorce process, the value of the “reconstituted estate” will be calculated based on the total value of community property prior to the wrongful actions by one spouse. The reconstituted estate will need to be divided between the spouses, and to ensure that assets can be divided fairly, a spouse who committed fraud may be required to pay a money judgment to the other spouse, or the other spouse may receive a larger share of the community property.

Contact Our Denton Asset Division Lawyers

If you believe that your spouse has attempted to conceal assets, The Law Office of Linda Risinger can help you determine the best ways to address this issue. We will work to ensure that your marital property can be divided fairly, and we will make sure any wrongful actions by your spouse are addressed during this process. Contact our Frisco property division attorneys today at 972-294-6533 to set up a free consultation.

Sources:

https://statutes.capitol.texas.gov/Docs/FA/htm/FA.7.htm

https://www.forbes.com/sites/catherineschnaubelt/2019/03/08/finding-hidden-assets-in-a-divorce/?sh=70a762f66fd1