Published on November 30, 2023

Dividing Real Property Held in Trusts or LLCs During a Texas Divorce

Real estate isn’t always held in an individual’s name. In many Texas divorces, property is owned by a trust or a limited liability company (LLC), which can create complex challenges in determining ownership, control, and division. If you’re facing a divorce that involves real property held in a trust or LLC, Guerra Days Law Group is here to help you navigate this high-stakes situation.

Why Use a Trust or LLC to Hold Real Estate?

Many people use trusts or LLCs to hold real property for reasons such as:

  • Asset protection
  • Estate planning and generational transfers
  • Privacy from public records
  • Business management and liability protection

While these legal structures offer benefits, they can complicate divorce proceedings—especially if it’s unclear whether the property is community or separate, and how much control each spouse has.

Is Property in a Trust or LLC Subject to Division?

That depends. Texas courts look beyond the name on the deed or organizational documents to determine whether the property is part of the marital estate. Key questions include:

  • When was the trust or LLC formed?
  • Was the property acquired before or during the marriage?
  • Did community funds contribute to the purchase, improvement, or maintenance?
  • Do the spouses have ownership interests or control rights in the entity?

If the court determines the trust or LLC is a separate legal entity, but the spouses have membership interests (in an LLC) or are beneficiaries (in a trust), those interests may be subject to division as part of the marital estate.

LLCs and Divorce in Texas

If either spouse owns an interest in an LLC that holds real estate, that ownership interest may be community property—even if the LLC owns the real estate separately. The court can:

  • Award one spouse their share of the LLC interest
  • Value the LLC based on its underlying assets (like real estate)
  • Divide profits or membership rights

Courts do not generally divide the LLC itself, but instead assign value and allocate ownership accordingly.

Trusts and Divorce in Texas

Trusts are more complicated. If the trust is irrevocable and created by a third party (like a parent), the court may view a spouse’s beneficial interest as separate property. However, if the trust was created by one of the spouses and funded with community assets, or if the spouse retains control as trustee, the court may include that property in the division.

Signs a Trust May Be Part of the Marital Estate:

  • The trust was created during the marriage
  • Community funds were used to buy trust property
  • The spouse who created the trust retains control over it

Disputes often arise over whether the trust is a legitimate estate planning tool or a vehicle to shield assets from the divorce.

Tracing Contributions to Property Held in an LLC or Trust

If community funds were used to purchase or improve property held in an LLC or trust, the court may allow a reimbursement claim to ensure fairness. This is especially common when:

  • One spouse uses marital income to pay a mortgage on a property titled to their family’s trust
  • Spouses improve rental property held in a jointly owned LLC
  • One spouse diverts community funds into a business entity that only they control

When One Spouse Hides Property in an LLC or Trust

Texas law does not allow a spouse to shield community assets by moving them into a trust or LLC shortly before or during divorce. The court may treat these transfers as fraudulent conveyances or sham transactions and reverse them through litigation.

Red flags include:

  • Transfers to a newly created trust or LLC during separation
  • Failure to disclose trust or LLC interests in discovery
  • Involvement of close relatives or business partners as “strawmen”

Valuing Real Estate in a Trust or LLC

Even if the property isn’t divided directly, courts must often determine the fair market value of real estate inside the entity to calculate how much the ownership interest is worth. This may involve:

  • Appraisals of the underlying property
  • Review of the LLC’s or trust’s income and expenses
  • Business valuation experts

Ownership percentages, voting rights, and control are also considered when determining what the interest is worth.

Why Legal Experience Matters

Trusts and LLCs can be used for legitimate purposes—but they can also be used to complicate divorce and hide assets. At Guerra Days Law Group, we know how to investigate entity ownership, trace financial contributions, and expose improper transfers. We work with appraisers, CPAs, and valuation experts to present clear, compelling evidence.

Get Trusted Guidance for Complex Property Division

If your divorce involves real estate held in a trust or LLC, don’t go it alone. Guerra Days Law Group has deep experience in high-asset and real estate-focused divorce cases. We’ll protect your interest and help you obtain a fair outcome.

Call us today to schedule a consultation and take control of your property rights.