Digital assets may be deemed community property in a divorce

On behalf of Kristina Voorhies Legan at Kristina Voorhies Legan

Digital assets acquired during a marriage in Texas would probably be deemed community property subject to division upon a divorce between the parties.

McAfee, the online security company, retained a research firm to survey several thousand people about the financial value they would assign to the digital assets they own. The results of the survey revealed that Americans value the digital assets they own at approximately $55,000. Given the increased recognition of the fact that digital assets have monetary value, a recent article in Law Technology News warns that your iTunes library could be in jeopardy in a divorce since digital assets are now “on the table for division” during divorce proceedings.

In Texas, issues pertaining to marital property division upon a divorce are often complex and contentious. Special challenges could be posed by digital assets. Digital assets are electronic files often described as text or media that is formatted into a binary source. Digital assets are stored on a variety of devices and in a variety of locations. Digital assets could be located on a laptop computer, your smart phone or in The Cloud. The term “digital assets” is broad enough to encompass any electronic information stored on the internet such as bank account information, electronic documents, photographs, entertainment files, metadata and digital applications.

The value of a digital asset depends upon what it is. On the one hand, old family photographs stored online might be worth little on the open market but could-for you and your family-hold great sentimental value. However, online businesses conducted on eBay or Etsy could be of considerable value. Similarly, a blog site that you own and which generates revenue from advertising could be valuable. Another type of asset which might be of significant value would be website domain names. Forbes Magazine reported that the domain name sold for $35 million in 2007.

Texas law

Since Texas is a community property state, all property owned by married persons upon the dissolution of a marriage is presumed to be the property of both the husband and the wife. Community property will be divided in a manner in which a Texas court deems to be just and right and having due regard for the rights of each party. Separate property is broadly defined as property acquired prior to the marriage or acquired during the marriage by inheritance, gift or by means of separate property funds.

An article published on the Dallas Bar Association website notes that the issue of how digital assets should be divided upon a divorce is a relatively new issue. However, the author of the article suggests that it is probably a safe bet to say that the Texas courts would apply traditional and time-tested rules to determine whether digital assets are marital or separate property. For example, if a digital asset such as a blog was created during the marriage, it might well be deemed a community property asset. On the other hand, if a blog were created prior to the marriage, it might be deemed the creator’s separate property.

Seeking advice

Property issues are often contentious in a divorce. Increasingly, people are becoming aware of the value of non-traditional property forms such as digital assets. Undoubtedly digital assets will prove to be yet another form of property which the courts will need to allocate between the parties upon a divorce. If a divorce is imminent, you should contact an attorney experienced in handling family law. The attorney can help you determine which digital assets may be deemed community property and which may be deemed your separate property.

Keywords: marital property, division, digital assets, divorce, Texas