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Oil or gas makes property division in divorce more challenging

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Oil or gas makes property division in divorce more challenging

| Sep 29, 2020 | family law |

Any high-asset divorce is significantly more complicated than one involving more modest wealth. Living in Texas, you may have made your fortune from oil and gas. Working out how to divide these assets when you divorce comes with its own set of challenges.

Texas uses the principle of community property. A court will work from the basis that everything a couple owns is community property to be divided equitably, though not necessarily equally. Each partner then has to prove that specific assets are separate property and not subject to division.

Separate property is that which you owned or claimed before you married. It also applies to any property you inherited or received as a gift while married, but you will have to prove that the gift was made to you alone.

Income earned from separate property usually counts as community property in Texas. However, specific items, such as the royalties earned from leasing mineral rights, may be treated as separate property.

The big problem with oil or gas assets in a divorce is placing a value on them.

  • Prices can fluctuate: This year, the price of oil fell heavily, although it has since recovered somewhat. What you are worth today, may be very different from your value in a year’s time.
  • Oil and gas resources are finite. What was once a highly profitable drilling site may be worthless in a few years.
  • Laws can change: If you have land with untapped oil or gas, there is no guarantee you will ever be allowed to exploit it. Certain areas are protected from drilling or could become so in the future. Stricter environmental laws could also reduce demand in the future.

Seek legal help to understand more about how oil or gas interests will be divided during your divorce.