One of the most common tactics a spouse may engage in prior to filing for divorce is trying to unfairly and surreptitiously reduce the size of the marital estate, also known as the community property in Texas. One of the legal tools an innocent spouse has during a divorce in response to such conduct is known as "fraud on the community." This article explains what "fraud on the community" means and gives common examples of fraud on the community.
In Texas, married couples are considered to be in a fiduciary relationship. This means, when it comes to dealing with their community property, husbands and wives have a legal duty to be fair and honest to each other. When one spouse acts in violation of this fiduciary relationship and unfairly disposes of community assets or funds during the marriage, especially without informing the other spouse, the innocent spouse can claim fraud on the community at divorce.
So what is an unfair disposition of community assets or funds? This is determined on a case-by-case basis, but courts will consider the following factors: (1) the value of the disposed assets compared to the total marital estate, (2) the amount of the marital estate left to care for the innocent spouse, (3) the relationship between the guilty spouse and whomever received the assets, and (4) whether any special circumstances justify the disposition. Some conduct that is likely to be considered fraud on the community includes:
- (1) transferring large amounts of money in savings or checking accounts to friends or family for no good reason;
- (2) paying back or making fake loans to friends or family;
- (3) buying expensive gifts for friends, family or the person with whom a spouse is having an affair ; and
- (4) hiding earnings.
If a divorce court finds there has been fraud on the community, the court will "reconstitute" the community estate. This means the court will pretend that the marital assets that were wasted by the guilty spouse still exist. The court will then divide the reconstituted estate. But how does a court divide assets that are long gone? The court has three options. First, when dividing the marital assets that remain, the court can give the innocent spouse a larger share to make up for the marital assets that are gone. Second, the court can give the innocent spouse a money judgment against the guilty spouse. This would mean the guilty spouse has to pay the innocent spouse a specific amount of money by court order. Third, the court can combine the prior two options and give the innocent spouse both a larger share of the remaining marital assets and a money judgment against the guilty spouse.
If you believe your spouse has committed fraud on the community estate and you need assistance with a divorce, contact Sugar Land divorce attorney Chikeersha Puvvada at 832-317-6705 or online today to schedule a free 30 minute consultation.