Divorcing spouses in Texas must work together to negotiate important issues like child custody, alimony, and asset division. Because of the importance of these issues, and because spouses must provide testimony and evidence to a court, spouses are expected to act with honesty and integrity during the negotiation process.

Unfortunately, this does not always happen. Many people see divorce as a zero-sum situation where, if one party gains something, the other party loses. This mindset is especially prevalent during negotiations involving money; many spouses will try to hide cash, collectibles, or investments during divorce and then recover the hidden assets once the divorce is over. This is especially easy to do when one spouse is a small business owner because a couple’s marital assets are often mingled with a small business’s income and expenditures. If you are divorcing a spouse with a small business, here are five places to look for hidden assets.

Common Small Business Owner Asset Hiding Strategies

Just because a business is a “small business” does not mean it cannot bring in a hefty amount of cash and profits. Some ways to conceal cash in a business include:

Small businesses often do so much more than provide a family’s income. They also represent countless hours of labor, sleepless nights, and years of personal investment in a project that may not always have been guaranteed to be successful. If you own a small business in Texas and are facing the prospect of divorce, you probably have questions about what will happen to your business in the property division process.

Is My Spouse a Co-Owner in My Business?

Even if your spouse’s name is not on the business’s documents, if you did not protect your business with a prenuptial or postnuptial agreement, your spouse likely owns at least part of the business. Any business growth since your marriage, including income, asset ownership, or even goodwill, is probably community property and will be subject to division in a divorce.

Does a Divorce Mean My Business is Over?

Many couples have successfully navigated the issue of small business ownership in a divorce in a way that allows the business to continue and thrive. There are several ways to do this, but the three most common are:

Dividing up money property at the end of a marriage can be challenging even for spouses who are cooperating. Married couples often acquire significant assets together such as houses, investment accounts, and joint retirement savings. Texas is a community property state, meaning that all earnings and assets acquired during the marriage are the property of both spouses. There are, however, a few exceptions. If you are going through a divorce and concerned about division of property issues, you should contact a qualified attorney. The Texas divorce and asset division process can be complicated, so you will want knowledgeable legal counsel to guide you.

What Counts as Community Property?

Community property includes any assets acquired during the duration of the marriage, by either spouse. It is not relevant which spouse’s earned income was used to purchase a particular asset or whose name it is under. If it was purchased using community funds, it is community property. Community property in Texas includes:

Income - Any income earned by either spouse during the marriage belongs equally to both spouses. Courts recognize that spouses make non-economic contributions to each others’ paychecks through emotional support or by managing the household so the other spouse can focus on working.

Financial misconduct, otherwise known as ' dissipation of assets,' in a divorce is when one or both spouses spent, gave away, transferred, converted, or otherwise mismanaged money or assets that would have been subject to property division in divorce. An example of this would be when a wife goes on a business trip and decides to meet up with another man. She picks up the tab for their hotel room and even treats him to an expensive dinner and luxury car rental. She puts it all on her own personal credit card, wrongly assuming that it is her own money to spend. However, it is not. Any money between her and her husband is marital property, and as such, should be spent on the betterment of the union and the family. Because her fling was not for the betterment of the family, it would be considered dissipation of assets.

If you believe that your spouse is guilty of dissipation of assets, inform your Dallas divorce attorney right away. The legal team at Clark Law Group will advise you on what evidence you need to gather to prove your case, and even enlist the help of a forensic accountant if necessary.

Making a Dissipation Claim

When two individuals are married, sharing a bank account seems like a good idea; after all, all of their money is going towards the same expenses, including housing, food, clothing, vehicles, and entertainment. However, when those same two individuals separate, all of 'our money' becomes 'my money,' and that joint account is suddenly not big enough to support the both of them.

While Texas is a community property state - meaning that all assets acquired during marriage belong to both you and your spouse (Texas Family Code, Sec. 3.002) - there are ways you can protect your assets and ensure that you do not walk away with thousands of dollars less than what you directly contributed.

Take Account of Your Finances Before You File for Divorce

People become different in the face of divorce, and they do things they never would have dreamt of doing otherwise.