When people think about real estate in divorce, they usually picture the family home or maybe a rental property. But for high-net-worth individuals in the Houston area—executives, energy professionals, investors—real estate exposure often comes through a much more complex vehicle: Real Estate Investment Trusts, or REITs. These financial instruments behave differently from physical real estate, and understanding how they’re treated in a Texas divorce is important if you want to protect your financial interests.
REITs 101: What You’re Actually Dealing With
A REIT is a company that owns, and in most cases operates, income-producing real estate. By law, REITs must distribute at least 90 percent of their taxable income to shareholders annually, which makes them attractive income-generating investments. They come in several forms: publicly traded REITs (listed on major stock exchanges), non-traded REITs (sold through brokers but not exchange-listed), and private REITs (available only to accredited investors and institutions).
The type of REIT matters enormously in a divorce context—not just for valuation, but for liquidity and the practical ability to divide the asset.
How Texas Community Property Law Applies to REITs
Under Texas law, investment assets acquired during the marriage are presumptively community property, subject to “just and right” division under Texas Family Code Section 7.001. REITs are no exception. If a spouse purchased REIT shares during the marriage using marital income, those shares are community property regardless of whose name is on the brokerage account.
Publicly traded REITs are generally the simplest to handle. They trade like stocks and can be valued daily using market price. Courts and attorneys can easily agree on a valuation date and divide shares directly, transfer to separate accounts, or use the value to offset other assets in the settlement. REIT dividends earned during the marriage are also community property.
The situation becomes more complicated with non-traded REITs. These do not have a real-time market price. Their value is typically reported at original offering price until the trust establishes a net asset value (NAV), which can take years. This means you may be looking at a situation where the stated value on paper is $50,000 but the true market value—if you could sell today—might be materially different. Non-traded REITs are also illiquid; most have redemption programs with significant restrictions and fees, which makes dividing them logistically challenging.
Private REITs add yet another layer of complexity. They’re generally restricted investments, meaning transferability is limited by the REIT’s operating agreement. A spouse trying to receive a share of a private REIT in divorce may find that the REIT’s managers must consent to any transfer—which they may refuse. In these cases, courts often must find creative solutions: awarding offsetting assets of equivalent value, or ordering one spouse to buy out the other’s community interest over time.
Valuation: The Core Battlefield
Valuing non-traded and private REITs in divorce almost always requires an expert. A financial analyst or appraiser familiar with real estate and private securities will look at the underlying property portfolio, operating income, debt levels, and comparable public REIT valuations. Both spouses should retain their own experts or agree on a neutral expert—because the difference between high and low REIT valuations can easily run into hundreds of thousands of dollars.
One particular issue in Houston and the surrounding communities is REITs with significant Texas commercial real estate exposure—office buildings, retail centers, industrial properties, or multifamily complexes. In volatile real estate markets, REIT valuations can shift considerably between the date of separation and the date of trial. This makes the choice of valuation date—typically the date of the divorce decree in Texas—strategically significant.
Dividends, Tax Basis, and Post-Divorce Planning
REIT dividends received during the marriage are community property and should be included in the asset inventory. However, REIT dividends are generally taxed as ordinary income rather than at the lower qualified dividend rate—a fact that affects the real after-tax value of those distributions and must be accounted for in any fair settlement.
Tax basis is also critical. When REITs are divided in kind (shares transferred to both spouses), each spouse takes their share with a proportional basis. But if one spouse receives the REITs in exchange for other assets, the tax implications of future sales differ. Getting proper tax advice before finalizing a settlement involving significant REIT holdings is not optional—it’s essential.
Houston, Katy, Sugar Land, and The Woodlands are all markets with strong commercial real estate investment cultures. It’s not uncommon for divorcing spouses in these communities to hold significant REIT positions through financial advisors, family offices, or through a closely held business. Regardless of how those positions are held, Texas law presumes them to be community property if acquired during the marriage, and a thorough accounting of all investment vehicles—including real estate securities—should be a priority in any high-net-worth divorce.