How Is Property Divided in a Texas Divorce? (Community Property Explained)

Texas presumes that everything you and your spouse own at divorce is community property (TX Family Code §3.003). To classify property as separate, the spouse claiming it must prove it by clear and convincing evidence.

*With important exceptions — see Chapter 3 on Permian Basin oil/gas issues.

The Tracing Problem

When separate and community funds get mixed (commingled), tracing the separate portion requires:

• Bank statements going back to the source
• Deeds, titles, and stock purchase records
• Expert testimony from forensic accountants
• Application of accounting methods like "community out first" or "minimum sum balance"

Lost or destroyed records = the property becomes community by default. Document EVERYTHING.

Texas Family Code §7.001 directs courts to divide community property in a manner that is "just and right." The Texas Supreme Court in Murff v. Murff (1981) listed factors courts can use to award one spouse more than 50%.

Real-World Disproportionate Awards

Odessa, Midland, and the Permian Basin produce more oil than most countries. This makes property division here uniquely complex.

Mineral Rights — The Surface/Mineral Estate Split

In Texas, surface and mineral rights can be owned separately. The bedrock characterization rule for royalty income was set by the Texas Supreme Court in Norris v. Vaughan, 260 S.W.2d 676, 679 (Tex. 1953), which treats production as a piecemeal sale of the mineral corpus, so the money it produces takes the character of the estate itself. Delay rentals are the one exception — they were treated as community in McGarraugh v. McGarraugh, 177 S.W.2d 296, because they compensate for postponed production rather than for depletion.

• Minerals owned before marriage = separate property
• Royalty income from separate-property minerals = stays separate (Norris v. Vaughan, 260 S.W.2d 676, 679 (Tex. 1953) — production is a piecemeal sale of the separate mineral corpus)
• Bonus payments from separate-property minerals = generally separate (bonus is consideration for the mineral estate itself, following the Norris rule)
• Delay rentals received during marriage = community property (McGarraugh v. McGarraugh, 177 S.W.2d 296 — delay rentals compensate for postponed production, treated like rent on the separate corpus)
• Lease executed during marriage on separate land = royalty and bonus follow the separate mineral estate; delay rentals paid during marriage are community
• Minerals acquired during marriage with community funds = both the estate and all income (royalties, bonuses, delay rentals) are community

Ranches and Working Land

Ranches that include grazing leases, livestock, and equipment often have:

• Separate-property land but community-property improvements
• Community-property livestock raised during marriage
• Need for an agricultural appraiser to value standing timber, water rights, and grazing leases

Retirement Accounts (QDROs)

401(k)s, pensions, and IRAs accumulated during marriage are community property to the extent of marital contributions. Dividing them requires a Qualified Domestic Relations Order (QDRO) — a separate court order the plan administrator follows. QDRO drafting is specialized and costs $500-$2,000 per plan.

Business Valuations

Oilfield service companies, law firms, medical practices, and small businesses often need:

• Certified business valuator (CVA, ASA)
• Forensic accountant to find hidden income
• Goodwill analysis (personal vs. enterprise goodwill)
• Income approach, market approach, and asset approach