Opinion Editorial: The Need for Effective Asset Protection in Divorce Proceedings

In divorce proceedings, asset protection is a paramount concern. These cases often involve complex financial situations and always carry the potential of severe emotional stress. But, as demonstrated in the recent Texas Appellate Court case, KREIT v. EL KHOURY, this process can become even more difficult when significant assets are held domestically and abroad, and when there are allegations of asset concealment and relocation.

The Necessity of Temporary Orders and Receiverships

In contentious divorces, courts often issue temporary orders aimed at preserving marital assets while the divorce process is underway. Under Texas Family Code Section 6.502, courts also have the power to appoint an independent receiver tasked with managing, controlling, and preserving the assets in dispute.

In KREIT v. EL KHOURY, the court utilized this power to appoint a receiver in light of significant asset transfers alleged by Pauline Kreit El Khoury -the appellee- and clear evidence that Mark Maher Kreit -the appellant- was not following existing injunctive orders. The decision highlights the need for aggressive asset protection measures in high-asset cases where a tumultuous divorce is ongoing.

The Differentiation Between Separate Property and Community Property

A significant dispute in this case involved the classification of assets as separate or community property and which assets could be placed under the control of the receiver. The assets in question were intensely complicated, ranging from local real estate properties to overseas bank accounts and foreign investments.

Under Texan law, all property owned by either spouse at the time of divorce is presumed to be community property – owned jointly by the couple. It can be contested, of course, by providing clear and convincing evidence that given assets are the separate property of one spouse, which is precisely what Mark Kreit unsuccessfully attempted.

The Consideration of Less Harsh Measures

While granting receiver control over disputed assets, courts must be seen to consider less punitive measures. The appeals court argued that the trial court had adequately done so by entertaining Mark Kreit’s contentions over community and separate property and his arguments for the filing of lis pendens over relevant real estate properties.

The Balance Between Judicial Discretion and Outcomes Equitable to Both Parties

The primary takeaway from KREIT v. EL KHOURY is that the courts retain broad discretionary powers in divorce proceedings, especially when substantial assets are involved. However, they must balance this discretion with the ultimate goal of ensuring outcomes that are just and right

Originally Post From https://caselaw.findlaw.com/court/tx-court-of-appeals/116707676.html

* This article was originally published here