Community property division is a crucial aspect of divorce proceedings in Texas, where the court determines a just and proper division of community property, taking into account the rights of each spouse. Fraudulent behavior, such as hiding assets or transferring community property to third parties, can impact the property division. In a marital context, fraud is defined as any wrongful act by one spouse that affects the division of assets. Even if a person does not intend to deceive their spouse, their actions may be considered fraudulent if they are inherently unfair.

Under Texas law, spouses owe each other a fiduciary duty, which requires any disposition of community property to be fair. If a party transfers community property to a third party without the other spouse's knowledge or permission, it is presumed to be constructive fraud. To determine whether a party engaged in constructive fraud, the court considers factors such as the relationship with the third party, the percentage of the estate the transferred asset represents, and any justifying circumstances.

If the court finds that a party has engaged in fraudulent transfers of assets, it must calculate the depletion of the community estate's value and determine the reconstituted estate's worth. The court must then divide the value of the reconstituted estate fairly and properly, which may include granting equitable or legal relief. Such relief may involve awarding the aggrieved spouse an appropriate share of the community property remaining after the fraud, a monetary award, or both.