The role that debt plays within property division
For many in Texas, the division of marital property is one of the most stressful issues within their divorce. Aside from matters involving child custody, property division is among the most difficult and potentially contentious aspects of ending a marriage. Many spouses are not aware that the division of assets is accompanied by the division of debt, as well. The manner in which debt is dealt with during divorce can make a world of difference in the long-term financial standing of both spouses.
Once the decision to divorce has been made, the first thing that spouses should do is to take steps to stop the accumulation of any additional debt. For spouses who have open accounts on which the other party is listed as an authorized user, it is imperative to call the creditor and remove that status at once. For accounts on which both spouses are listed as responsible parties, ask that a freeze or hold be placed on the account so that no additional purchases can be made. These steps ensure that neither spouse runs up new debt during the course of the divorce.
When considering how to handle existing debt, spouses who are concerned about their future credit standing may want to pursue paying off those accounts before the divorce is made final. While doing so can lead to an initial hit to one’s savings, it also ensures that there are no issues down the line in terms of those debts not being repaid. Regardless of which spouse assumes the responsibility for a given debt within the divorce agreement, the creditor can and will pursue both parties if repayment is not made. This can lead to a decreased credit score for both parties, even of only one is supposed to be making payments on the debt.
Many Texas spouses make the mistake of only focusing on the asset side of property division, and neglect to consider how shared debt will be handled. In some cases, simply deciding which party will be responsible for paying certain debts is not enough. Taking action to pay off those accounts before the divorce is made final is often the best possible solution for a credit-conscious individual.
Include insurance within property division planning
During the course of a Texas divorce, many spouses are primarily concerned about the manner in which marital assets will be divided. This focus is appropriate since the outcome of the property division process will color the financial lives of both spouses for many years to come. It is important for individuals to take the time to consider the full range of issues that come into play when dividing assets, which go far beyond who will end up with what.
One concern that is easily overlooked during this hectic time is insurance. Spouses must realize that their insurance needs will change after a divorce and that their access to affordable coverage may also shift. This is especially true for those who obtain various types of insurance through the employment benefits of their spouse. Once the marriage ends, so does the eligibility that made such coverage possible.
Savvy spouses will shop for new policies before their divorce is made final and will enter into property division negotiations with an understanding of what it will cost to obtain new coverage. This is true regardless of whether one is in need of life insurance, auto insurance, health coverage or any other form of insurance. By understanding what it will take to retain the same or better coverage than was in place before the divorce, spouses can negotiate a division of property that will allow them to acquire those policies.
When shopping for new insurance, Texas spouses can take advantage of the ability to search for better coverage at more affordable prices. Some may find that there are better policies available for the same or even lower costs. Once the appropriate level of coverage has been put into place, spouses can move beyond their divorce with a sense of security for whatever life may bring next. Regardless of one’s insurance scenario, this is a topic that has a rightful place within the larger property division scheme.
Complex property division must include taxation issues
Texas couples who hold a diverse set of marital assets will have a range of challenges when negotiating the details of a divorce. The process of negotiating complex property division can be tricky, especially in cases in which one spouse handled most of the family’s financial matters. One of the most important aspects of a successful property division strategy is understanding the full range of tax consequences tied to each asset. Failing to do so is common, and can leave divorced spouses with a far different financial scenario than they anticipated.
For example, take a family in which multiple rental properties are owned as investments. In the event of a divorce, spouses have to assess the value of each piece of property, including the current market value as well as the income-producing aspects of the investment. Issues such as deferred maintenance must also be taken into consideration.
In regard to taxation, the taxes paid on a piece of investment property can change over time. For example, a spouse who retains a rental property could find that the home’s tax basis has decreased because of depreciation, while the home’s market value has grown. This would leave the owner responsible for a much higher gain to report upon the sale of the home, resulting in higher tax obligations.
Assessing these and similar potential tax ramifications is a difficult process. Many Texas spouses make use of the services of a professional home appraiser and tax professional when preparing to divorce. Those who are able to gain a comprehensive understanding of the current and projected tax obligations of various assets are in a far better position to negotiate a complex property division than those who enter the process unaware of these issues.
Factoring Social Security into the property division process
As a Texas couple moves through the stages of divorce, the division of marital property will play a central role. When considering various strategies for dividing marital assets, it is imperative to take a long-term view of the subject. Specifically, property division choices should reflect a spouse’s retirement goals, even if retirement is still many years away.
When thinking about retirement, many spouses are unaware that they will be entitled to claim a spousal benefit on the work record of their ex. Doing so requires that the marriage lasted at least ten years. In addition, both the claiming party and the former spouse must be at least 62 years of age at the time the claim is made. Finally, the party making the claim must be unmarried when the benefits begin. In addition, divorced spouses may also be eligible to make a survivor’s claim if their former spouse precedes them in death.
Claiming these benefits has nothing to do with one’s divorce agreement. In fact, there is no method through which one spouse can restrict the other’s ability to access these benefits. When the time comes to making the claim, no impact is made on the Social Security benefits of the spouse whose work record is used as the basis for these payments. In fact, he or she will likely not even know that an ex is receiving spousal benefits.
While the availability of spousal benefits is not an issue that needs to be addressed within divorce negotiations, it is a topic that should be considered by the party who wishes to make the claim. These benefits are part of one’s overall retirement planning, and spouses should structure their property division strategy in a manner that supports those long-term goals. Making wise financial decisions during a Texas divorce, individuals can ensure that they are able to retire when they choose, and with a level of financial stability.
Property division in divorce can impact retirement goals
It’s understanding for individuals in Texas to feel that they have little control over their lives when divorce strikes. After building a marriage and marital assets over the course of a number of years, two divorcing parties may equally be eager to claim as much of these shared assets as possible. The outcome of a property division battle can affect the parties for years, including during retirement.
It’s important to be involved in the family’s financial affairs. It may be helpful to seek the advice of a qualified financial planner during a divorce proceeding. The advisor can help to ensure that an individual’s current financial needs are sufficiently addressed in the final divorce settlement. It’s also helpful for the individual to develop a vision of what he or she would like life to look like during retirement.
Some people prefer to spend their retirement traveling, while others wish to remain at home and volunteer. It’s important to calculate the amount of money required to sustain one’s particular retirement goals and then work toward a division of retirement assets that can accommodate this. In addition to funds coming from individual retirement accounts, retirement dollars can also come from Social Security. Moreover, a person may also simply wish to work part-time during retirement.
The idea of getting a divorce in Texas may spark a feeling of relief in those who are ready to end their marriage so that they can move forward with their independent lives. However, dissolving a marriage can also cause anxiety, as each party doesn’t always know how their futures will look without the monetary and emotional support of their soon-to-be-exes. Nonetheless, seeking help in understanding the applicable divorce laws when it comes to property division in our state can improve a person’s chance of having a secure financial future.
Should an advisor guide the division of marital property?
For many Texas couples, the financial ramifications of a divorce are a top priority as they prepare to end their marriage. This is understandable, as the outcome of the division of marital property will shape the financial future of both parties. Achieving a fair and favorable property division agreement can be challenging, even when there is a low level of contention between spouses. Many find it beneficial to hire a Certified Divorce Financial Analyst to assist in this process.
A CFDA is a financial professional who is specifically trained to address the financial matters related to the end of a marriage. That process begins by taking a comprehensive view of a couple’s income, assets and debt. The CFDA will then question the parties about their financial goals before beginning the process of providing asset division strategies.
Much of the value that a CFDA brings to a divorce is a keen understanding of the tax ramifications that accompany the division of marital assets. In many cases, spouses are unaware of the tax hit that can follow the division or liquidation of certain forms of assets, such as the sale of a home or the liquidation of a 401(k). The CFDA is there to ensure that both sides understand what their assets will really be worth once the dust has settled and the tax bills are satisfied.
By having an advisor in place to guide the financial decisions within a divorce, spouses can move through the other legal aspects of ending the marriage with a lower level of stress. They also gain the peace of mind that comes with having a grasp of how their financial scenario will look once the division of marital property is complete.