Property division negotiations during a divorce can become contentious when the assets being discussed have increased in value or could appreciate significantly in the future, and this is especially true when the divorcing couple lives in a state with strict community property laws like Texas. Assets that a divorcing spouse owned before they got married are usually considered separate property in a Texas divorce, but there is an exception to this basic rule when the assets involved increased in value during the marriage.
Separate property appreciation
This is known as separate property appreciation, and the gain in value is considered part of the marital estate even though the asset remains separate property. The same principle is applied to businesses that were owned prior to a marriage but grew and prospered during the marriage. The business remains the founder’s property, but the increase in its value is subject to property division. A piece of artwork could also become embroiled in property division negotiations due to a process called comingling. This occurs when community funds are used to maintain or improve a separate asset. A piece of art could become comingled with the marital estate if money from a joint bank account is used to restore it.
Artwork that is part of the marital estate
Placing a value on art that both parties can agree to is not always easy in a divorce, and several appraisals may be needed before the spouses see eye to eye. Selling artwork acquired during a marriage and dividing the proceeds evenly avoids these problems, but this may not be an acceptable solution when art collections have been built carefully and over a long period.
Dividing property during a divorce is often a thorny process in states with community property laws, and even separate assets may be discussed during negotiations if they appreciated during the marriage. Couples who wish to avoid these problems can address them by drafting prenuptial or post-marital agreements.