Questions about separate vs community property and debt

[ScottGunn]

What is the name of your state? Texas

I am in the process of filing for divorce after 24 years. My question is I was permanently disabled during our marriage over 10 years ago. We paid for our house using the settlement money from my permanent injuries. I read several places that property can be claimed as “separate property” if it was gained from “recovery of personal injury by the spouse during marriage”. Does this apply or am I reading it wrong?

Secondly, after becoming disabled and my wife refusing to work, my parents and us drafted an signed open ended loan agreement or contract. They loaned us enough each month to survive and pay bills. They have kept meticulous records of every loan over the years, which we all have survived on (wife, 2 kids and myself). Loan balance is up around $400k now. So when the divorce goes through, is this debt equally divided between my wife and I like any other debt would be?

Thank you for your help

 

[adjusterjack]

I am in the process of filing for divorce after 24 years. My question is I was permanently disabled during our marriage over 10 years ago. We paid for our house using the settlement money from my permanent injuries. I read several places that property can be claimed as “separate property” if it was gained from “recovery of personal injury by the spouse during marriage”. Does this apply or am I reading it wrong?

I have no idea what you read but the following article appears to indicate that you have it backward. Note that there are case decisions cited that you can google for further study.

http://www.divorcereality.com/injury-settlements-are-usually-community-property-in-a-texas-divorce/

Secondly, after becoming disabled and my wife refusing to work, my parents and us drafted an signed open ended loan agreement or contract. They loaned us enough each month to survive and pay bills. They have kept meticulous records of every loan over the years, which we all have survived on (wife, 2 kids and myself). Loan balance is up around $400k now. So when the divorce goes through, is this debt equally divided between my wife and I like any other debt would be?

If your parents were rich enough to loan the two of you $400,000 then they are rich enough to forgive your debt once you get divorced. Your wife knows that and so will the judge so I don't think you will be able to stick your wife with a $200,000 post-divorce debt to your parents when yours is almost guaranteed to be forgiven. Admit it, neither of you will ever be in any position to pay any of it back ever. Your parents know that, too, and likely don't ever expect to be repaid despite keeping meticulous records.

 

[HRZ]

IF your parents shut off the money faucet....why would not your wife be compelled to work? What is her education and what marketable skills or licenses does she hold?

In many situations if one became disabled during the marriage the STBX can be required to support the other.

Your parents have no duty to keep making " loans"

 

[stealth2]

I would suggest you consult with a local attorney.

 

[ScottGunn]

I have no idea what you read but the following article appears to indicate that you have it backward. Note that there are case decisions cited that you can google for further study.

http://www.divorcereality.com/injury-settlements-are-usually-community-property-in-a-texas-divorce/

I read it in both the Family Code at https://statutes.capitol.texas.gov/docs/FA/htm/FA.3.htm (Texas government website) and on the original petition for divorce form.


If your parents were rich enough to loan the two of you $400,000 then they are rich enough to forgive your debt once you get divorced. Your wife knows that and so will the judge so I don't think you will be able to stick your wife with a $200,000 post-divorce debt to your parents when yours is almost guaranteed to be forgiven. Admit it, neither of you will ever be in any position to pay any of it back ever. Your parents know that, too, and likely don't ever expect to be repaid despite keeping meticulous records.

Parents are not rich, these were made over a time span of 12 years and they had to sell off land and property to afford it. If the loan is not paid off before they die, the remaining balance is to be subtracted from my portion of my inheritance, so it will be paid back one way or another. I’m not trying to “stick” my wife with anything, just want the outcome to be fair and even.

 

[ScottGunn]

I have no idea what you read but the following article appears to indicate that you have it backward. Note that there are case decisions cited that you can google for further study.

http://www.divorcereality.com/injury-settlements-are-usually-community-property-in-a-texas-divorce/

Actually the article you posted a link to says the same as I did if you read down:

“The following elements of damages have been held to be separate property:

• Mental pain and anguish, Moreno v. Alejandro, 775 S.W.2d, 735,737 (Tex. App. – San Antonio 1989, writ denied).
• Physical pain and suffering, Graham v. Franco, 488 S.W.2d 390, 396 (Tex. 1972).
• Disfigurement, Graham v. Franco, 488 S.W.2d 390, 396 (Tex. 1972).

The settlement I got was for pain and suffering

If your parents were rich enough to loan the two of you $400,000 then they are rich enough to forgive your debt once you get divorced. Your wife knows that and so will the judge so I don't think you will be able to stick your wife with a $200,000 post-divorce debt to your parents when yours is almost guaranteed to be forgiven. Admit it, neither of you will ever be in any position to pay any of it back ever. Your parents know that, too, and likely don't ever expect to be repaid despite keeping meticulous records.

 

[not2cleverRed]

Actually the article you posted a link to says the same as I did if you read down:

“The following elements of damages have been held to be separate property:

• Mental pain and anguish, Moreno v. Alejandro, 775 S.W.2d, 735,737 (Tex. App. – San Antonio 1989, writ denied).
• Physical pain and suffering, Graham v. Franco, 488 S.W.2d 390, 396 (Tex. 1972).
• Disfigurement, Graham v. Franco, 488 S.W.2d 390, 396 (Tex. 1972).

The settlement I got was for pain and suffering

The problem is that even if it were at one point in time separate property, you took that money and put it into the marital home. The money has been comingled and no longer exists in an account anywhere.

 

[HRZ]

I don't know how your loan is worded but it seems entirely possible that your inheritance will be docked for her share of the loan she signed

You need an attorney.

IF she is able to work then it makes sense that she get her fanny employed .

It makes very little sense that your parents make loans to you under some smoke as an inheritance advancement ...they seem to be enabling your wife's failure to work. So they do is to assist the grandchildren , I get that part

IT is very likely that she has a duty to support you .and her family ..and the equation needs to be addressed in that light...

Explain again why she is not working? This is 2018 not 1718 !

 

[ScottGunn]

I don't know how your loan is worded but it seems entirely possible that your inheritance will be docked for her share of the loan she signed

You need an attorney.

IF she is able to work then it makes sense that she get her fanny employed .

It makes very little sense that your parents make loans to you under some smoke as an inheritance advancement ...they seem to be enabling your wife's failure to work. So they do is to assist the grandchildren , I get that part

IT is very likely that she has a duty to support you .and her family ..and the equation needs to be addressed in that light...

Explain again why she is not working? This is 2018 not 1718 !

The only reason my parents did loan us money was to make sure the grandchildren and myself had basic needs met.

There is no good explanation why she isn’t working. I mean I am divorcing her not trying to defend her here! I can’t physically drag her out of the house each morning and force her to work.

 

[stealth2]

So are you the primary caregiver?

 

[stealth2]

Frankly, it appears that your parents very kindly gifted you/your wife $400k. You have nothing in writing, no loan agreement, no repayment agreement, nothing.

ETA: I reread, and it seems you have some sort of "contract". What it entails? Who knows.

You REALLY need a lawyer.

As for your injury settlement? You comingled the funds. It's now marital.

You REALLY need a lawyer.

 

[PayrollHRGuy]

Frankly, it appears that your parents very kindly gifted you/your wife $400k. You have nothing in writing, no loan agreement, no repayment agreement, nothing.

Why do you say that when the OP wrote this, "Secondly, after becoming disabled and my wife refusing to work, my parents and us drafted an signed open ended loan agreement or contract."

 

[HRZ]

Get a lawyer !

Your parents might be very smart to close off the $$$ faucet .

THe collectability of a loan from somebody with no means to pay it is most unlikely .
IF your parents think the IRS will allow a bad debt write off for this...Id not hold my breath. And to docuement it as a loan may be inconsistent with any tax advantages available to your parents of having younall as dependents .

IF she is able to work the court might well impute an earnings capacity to her and order that she support you.

BTW what is her education and likely marketable skills ?

And your parents need a wake up call !

 

[stealth2]

Why do you say that when the OP wrote this, "Secondly, after becoming disabled and my wife refusing to work, my parents and us drafted an signed open ended loan agreement or contract."

As you will see - I edited after rereading. He REALLY needs a lawyer.

 

[Zigner]

Why do you say that when the OP wrote this, "Secondly, after becoming disabled and my wife refusing to work, my parents and us drafted an signed open ended loan agreement or contract."

However, without knowing anything about this "open ended" agreement, none of us can really comment on its validity.