What is Fraud on the Community in Texas Divorce?

A spouse can manage community property, but not give it away or destroy it. When one spouse hides assets, spends community money on an affair, gambles it away, or transfers property to a relative, Texas provides a specific remedy: Family Code § 7.009, fraud on the community.

Actual and Constructive Fraud

Texas recognizes two forms. Actual fraud involves dishonesty of purpose or intent to deceive — hiding an account, forging a signature, transferring assets in anticipation of divorce. Constructive fraud requires no bad intent: a spouse owes a fiduciary duty to the community, and a gift or transfer of community property that is unfair to the other spouse breaches that duty even if the spouse thought it was fine. Once a transfer is shown, the burden shifts to the disposing spouse to prove it was fair.

The Statutory Remedy

Section 7.009 sets out a clear mechanism. If the trier of fact determines that a spouse committed actual or constructive fraud on the community, the court must:

  • calculates the value by which the community estate was depleted;
  • calculates the amount of the reconstituted estate — the community estate as it would have existed absent the fraud; and
  • divides that reconstituted estate in a just and right manner.

To accomplish a just and right division of the reconstituted estate, the court may grant any legal or equitable relief necessary, including awarding the wronged spouse an appropriate share of the community estate that remains, a money judgment against the spouse who committed the fraud, or both.

What It Looks Like in Real Cases

  • Community funds spent on a girlfriend or boyfriend — travel, rent, jewelry, a vehicle.
  • Gambling losses or sudden large cash withdrawals with no explanation.
  • Transferring a house, business interest, or account to a parent or sibling to hold.
  • Paying inflated salaries or bonuses through a closely held company to move money out of reach.
  • Selling property below market to a friend, then buying it back after the divorce.
  • Unreported cryptocurrency or undisclosed accounts.

Proving It

These claims are built in discovery: bank and card statements traced transaction by transaction, tax returns, loan applications, business records, and often a forensic accountant. Where a third party helped hide assets, that person or entity may be joined to the suit. Where an entity is involved, see joining a business to the suit.

Waste Is Not the Same as Spending

Ordinary living expenses, business losses, and even bad investments generally are not fraud. The claim targets transfers and expenditures that were unfair to the community — not decisions that simply turned out poorly. Courts also look at how much was spent relative to the size of the estate.

Transfers Made While the Case Is Pending

There is a separate weapon for conduct during the divorce itself. Under § 6.707, a transfer of community property or a debt incurred by a spouse while the suit is pending is void as to the other spouse if it was made or incurred with the intent to injure that spouse’s rights. The transfer is not void as against someone who dealt with the transferring spouse without notice of that intent, and the spouse seeking to void the transaction carries the burden of proving the other person had notice.

Move Early

Assets that are moving are easier to freeze than to recover. If you suspect a transfer is coming, a temporary restraining order or standing order violation proceeding is usually the first step, not the last.

Frequently Asked Questions

What is fraud on the community in Texas?

It is the improper transfer, concealment, or waste of community property by one spouse. It can be actual fraud, involving intent to deceive, or constructive fraud, which requires no bad intent.

What can the court do about wasted community assets?

Under Section 7.009 the court reconstitutes the estate and may award the wronged spouse an appropriate share of the remaining property, a money judgment, or both.

Is spending money on an affair fraud on the community?

It often is. Community funds used for a third party are a classic constructive fraud claim, and the spending spouse must prove the transfers were fair.

Texas Statutes Referenced

Related Pages

Talk With a Texas Divorce Attorney

If money is moving, act now. Freezing assets is far easier than chasing them. Call 713-955-6182 or contact The De Leon Law Firm.