Earlier this month I blogged about claims of waste and constructive fraud. Here is how such claims can benefit the wronged spouse.
The Texas Family Code now provides specific guidance on how a divorce court can remedy fraud committed by one spouse on another. Section 7.009, Fraud on the Community; Division and Disposition of Reconstituted Estate, states:
(a) In this section, “reconstituted estate” means the total value of the community estate that would exist if an actual or constructive fraud had not occurred.
(b) If the trier of fact determines that a spouse has committed actual or constructive fraud on the community, the court shall:
(1) calculate the value by which the community estate was depleted as a result of the fraud on the community and calculate the amount of the reconstituted estate; and
(2) divide the value of the reconstituted estate between the parties in a manner the court deems just and right.
(c) In making a just and right division of the reconstituted estate under Section 7.001, the court may grant any legal or equitable relief necessary to accomplish a just and right division, including:
(1) awarding to the wronged spouse an appropriate share of the community estate remaining after the actual or constructive fraud on the community;
(2) awarding a money judgement in favor of the wronged spouse against the spouse who committed the actual or constructive fraud on the community; or
(3) awarding the wronged spouse both a money judgement and an appropriate share of the community estate.
How Does It Work?
So, here is an example. Let’s assume the value of the community estate is $500,000 at the time of the divorce. Further, assume that the court finds that the husband committed constructive fraud in the amount of $50,000 against the community. Accordingly, the reconstituted estate is $550,000.
The court could:
- Award the wife more than 50% of the community estate while pretending the husband has the $50,000 which will result in more real assets being awarded to the wife;
- Award the wife a judgement against the husband for some equitable portion of the $50,000; or
- Award both a money judgement and a disproportionate share of the community estate to the wife.
This explains what the outcome of a waste or constructive fraud claim may be, but what exactly do these terms encompass? You can read my previous blog on Waste and Constructive Fraud for more information on this topic, and for more information on how to determine whether your spouse may be hiding money, read my blog on Unreported Income and Hidden Assets.