Texas law, explained
The short answer
In a Texas divorce, the house, retirement accounts and investments follow the usual rules: what was earned or bought during the marriage is presumed community property and divided in a just-and-right way, while what you owned before marriage or inherited stays yours if you can trace it. Retirement plans are usually split by a qualified domestic relations order, and stock options follow a time formula in Texas Family Code § 3.007. John B. Polk, a Dallas family law attorney, works with valuation and tax experts on these divisions.
How high-asset property is divided in Texas
Wealthy couples divide assets under the same Texas rules as every other couple. Community property is divided in a manner the court finds "just and right" (Texas Family Code § 7.001), separate property stays with its owner, and all property is presumed community until proven otherwise by clear and convincing evidence.
What changes is the work. Larger estates tend to hold assets that are hard to value or hard to split: a home in Highland Park or University Park, rental portfolios, vacation property in another state, pensions, deferred compensation, stock options, restricted stock units, private equity funds and family trusts. Each has its own valuation questions, tax consequences and transfer rules.
A fair division compares assets after tax and after cost, not just by their face value. A dollar in a 401(k), a dollar in a brokerage account with a large built-in gain and a dollar of home equity are not worth the same to the person who receives them.
Keeping the family home
A house bought during the marriage is usually community property, and there are three common outcomes: one spouse keeps it and buys out the other's share, the house is sold and the proceeds divided, or the spouses keep owning it together for a set time, for example until a child finishes school. Texas does not require a sale to finalize a divorce.
The equity is the market value minus the mortgage and other liens. The spouse who keeps the house usually pays the other spouse's share of that equity in cash or by taking less of another asset, and refinances so the other spouse is no longer on the loan. If both spouses want the house and cannot agree, the court decides as part of the just-and-right division, often considering the children's needs and whether the spouse asking for it can afford it.
The full picture, including houses owned before marriage, rentals and second homes, is in the guide on keeping the house. Taxes and costs of sale belong in the comparison too.
401(k)s, IRAs and pensions
The part of a retirement account earned during the marriage is community property, and your spouse can claim a share of it. The part you brought into the marriage can be your separate property; for a 401(k) or other defined contribution plan, Texas Family Code § 3.007(c) lets you trace it using the same rules that apply to any other asset.
A pension works differently, because it promises a future monthly benefit instead of holding an account balance. Texas courts generally divide only the share earned during the marriage, based on how much of the service happened while the spouses were married, and value it as of the divorce. After 20 years of marriage that share is often large, which is why the details of the plan matter.
- Employer plans such as 401(k)s and private pensions are divided with a qualified domestic relations order (QDRO) that the plan must approve.
- IRAs are divided by transfer under the divorce decree and do not need a QDRO.
- Retirement accounts do not have to be split at all if the spouses agree to offset them with other property.
Stock options, RSUs and private investments
Yes, your spouse can receive part of stock options, restricted stock and RSUs granted during the marriage, even if they are unvested. Texas Family Code § 3.007(d) uses a time formula for employer stock option and restricted stock plans, and it is commonly applied to RSUs: for an award granted during the marriage that vests after the divorce, the employee's separate share is the time from the divorce to vesting, divided by the time from grant to vesting. The rest is community.
The formula applies separately to each vesting date, and awards granted before the marriage have their own version of it. Because unvested awards often cannot be transferred, settlements usually leave them with the employee and either pay the other spouse as they vest or offset them now.
Private equity, hedge fund and investment partnership interests are divided by their ownership interest, not by the fund's underlying assets. They raise questions of value, future capital calls and transfer restrictions, and are often kept by the investor spouse with an offset.
How John helps with homes, retirement and investments
High-net-worth divorces in Dallas are handled by family law attorneys who work closely with valuation, accounting and tax professionals, and John B. Polk is one of them. He has practiced family law in Dallas for more than 25 years and represents both women and men. On high-asset cases he works with valuation experts, forensic accountants, CPAs, tax advisors and financial planners, so each offer is measured by what you actually keep.
- Real estate appraisals, refinance planning and buyout terms for the family home.
- Tracing separate contributions in retirement accounts and separate funds in investment accounts.
- QDRO terms reviewed against the plan's rules before the decree is signed.
- Equity awards scheduled by grant and vesting date under the Texas formula.
- Tax effects of each option reviewed with a tax advisor.
He prepares every litigated case as if it will go to trial while exploring settlement, through negotiation, mediation, collaborative law, arbitration or trial. For the rules behind the whole division, see property division; for a family company, see business valuation and protection.
What happens when you hire John
- 1
Consultation
You bring what you know about the house, accounts and awards. John explains how Texas law treats each and what records to gather.
- 2
Gather and trace
Plan statements, grant documents, deeds and account histories are collected. Separate contributions are traced and community shares are calculated.
- 3
Value with experts
Appraisers, valuation experts and tax advisors put real numbers on the home, pensions, equity awards and private investments.
- 4
Negotiate the division
John negotiates or mediates who keeps what, on after-tax numbers, including buyout and refinance terms.
- 5
Finish the paperwork
Decree terms, QDROs and transfer documents are drafted so each plan and title office can carry them out.
I highly recommend John for anyone going through a divorce. He was always available to give advice and strategize. I interviewed many firms big and small but chose John because of his experience and personal touch. He was very responsive. I felt like he was truly invested in making sure that I had the best outcome possible, and I believe that I did. Call John if you want a great lawyer who treats his clients like family.
Questions people ask
Do retirement accounts always have to be divided?
No. Spouses can agree that one keeps a retirement account and the other receives other property of equal value instead. A court may also award a whole account to one spouse as part of a just-and-right division, and any part traced as separate property is not divided.
What happens to a house purchased before marriage but paid off together?
It generally stays the separate property of the spouse who bought it, because Texas looks at when title first arose. If community money paid down the mortgage, the community may have a reimbursement claim under Texas Family Code § 3.402. The owner's separate estate cannot offset that claim with the value of the family living in the house, because § 3.402 bars that offset for a primary or secondary residence.
Can a spouse claim appreciation on a separately owned home?
Usually not as an owner. Increase in value of a separate home caused by the market stays separate. If community funds paid for capital improvements or reduced the loan principal, the community may have a reimbursement claim, which is a claim for money, not a share of the house.
How do we divide multiple rental properties in a divorce?
Each property is characterized on its own: when and with what money it was bought. Rent collected during the marriage is generally community, even from a separate property. The properties can be split between the spouses, sold, or kept by one spouse with an offset, and tax basis and depreciation affect what each is really worth.
Who pays property taxes while a divorce is pending?
Whoever the spouses agree on or the court orders in temporary orders. Under Texas Family Code § 6.502, a court can give one spouse exclusive use of the home and make orders to preserve the property, which commonly includes who pays the mortgage, taxes and insurance. Payments made from community or separate funds during the case can be accounted for in the final division.
How do we divide a vacation property outside Texas?
A Texas court divides it as part of the estate, but it cannot transfer title to land in another state directly. Instead it orders a spouse to sign a deed, which is then recorded where the property is. Local taxes, sale rules and title requirements of that state also apply.
What happens to a second home purchased during marriage?
It is presumed community property and is divided like the main home: kept by one spouse with a buyout or offset, sold, or co-owned for a period. If separate money paid for part of it, that share can be traced and kept separate.
Can I protect family wealth that existed before marriage?
Yes. Property you owned before marriage, and gifts or inheritances received during it, are your separate property under Texas Family Code § 3.001 if you can trace them. A prenuptial or postnuptial agreement can also keep income from that wealth separate, which Texas otherwise treats as community.
What happens to assets held in a family trust?
It depends on the trust. Assets held in a trust are owned by the trustee, and a trust created by a parent or grandparent for one spouse is usually that spouse's separate interest. How distributions are treated depends on the trust terms, and a trust funded during the marriage with community property is a different question.
Can divorce affect my ownership in an investment partnership?
It can affect its value in the division, but rarely the partnership itself. The divorce divides your interest, not the partnership's assets, and most partnership agreements restrict transfers. The usual result is that you keep the interest and the other spouse receives other property for any community share.
How do I avoid unnecessary taxes when dividing assets?
Compare assets after tax and use the transfer methods the tax law allows. Property transfers between spouses incident to divorce are generally not taxed at the time, but the receiving spouse takes over the tax basis. Retirement funds should move by QDRO or a direct transfer, not a cash withdrawal; John reviews these points with tax advisors, and your own CPA should confirm them.
Do we need a financial expert for a multimillion-dollar divorce?
Usually yes, though the law does not require one. When an estate includes a business, equity awards, private investments or long tracing histories, an appraiser, valuation expert or forensic accountant often decides how accurate the division is. John works with these experts and helps decide which ones your case needs.
Guides on this topic
PropertyKeeping the House in a Texas Divorce: Buyouts, Sales and EquityBuy out, sell or co-own for a while. How Texas handles the family home, homes owned before marriage, rental properties and vacation homes in a divorce.
PropertyDividing 401(k)s, Pensions and Stock Options in TexasThe share earned during marriage is divided. How QDROs work, how Texas splits unvested stock options and RSUs, and what to check before signing.