The Big Questions about Money and Divorce
Even in the most favorable circumstances, certain aspects of your divorce process are likely to be challenging; you are coping with a transition at the same time you are experiencing a legal ordeal. For better or worse, divorce is as much a disentanglement of an emotional relationship as well as a legal one, and on top of that also touches one of the most stressed-over aspects of our day-to-day life: money. For most couples, divorce and finances go hand-in-hand. Money is not the only reason couples split up, but it’s one of the biggest factors that needs to be sorted as you build your new lives separately. Managing your money post-divorce requires patience, guidance, planning, and resources.
We’d like to go over some of the biggest questions we hear about money and divorce. We’ve talked to hundreds of clients facing similar issues. We’ve also talked to dozens of experts in family law and beyond about the complex nature of how money and divorce are inextricably linked.
What to do if you’re a lower-earning spouse?
Whether a couple has been married for 5, 10, or 20 years, one of the more contentious aspects of a relationship that can come during a divorce deals with who makes more.
When there’s a substantial income gap in a marriage, financial fear can manifest. One spouse might be a high-income earner with considerable wealth accumulated over time, while the other, possibly the stay-at-home spouse, may lack financial know-how. They might feel lost about the total value of their assets or how to manage bills and investments.
Maybe this imbalance has manifested itself in other ways. Some spouses report feeling smothered by their partner’s more ostentatious ‘success.’ This disparity in wealth does not mean you need to feel trapped in a relationship, or worse, it does not mean you do not have options when it comes to divorce!
How to make a divorce financial plan:
Track Your Expenses:
- If you realize that divorce is unavoidable, or if you believe it might be a possibility in the future, start tracking your household expenses more carefully. This can help you create a post-divorce budget. It also helps your legal team judge your assets, liabilities, and expenses when considering spousal support and child support.
Don’t Spend Big:
- Cars, vacations, or any other big financial expense should be considered closely. Preceding a divorce, we advise our clients to be conservative with their expenses and their decisions.
Gather Documents:
- Gathering financial documents and other valuable information can help. This includes information on individual bank accounts, shared bank accounts, deeds, and any other relevant documents.
What happens to the house in a divorce?
When you’re asking yourself the big questions about money and divorce, you’re undoubtedly going to come across questions related to property. Usually, a person’s biggest asset (financially speaking of course) is their house. It could also include their property in general. Maybe they bought a second home, an investment property, or they inherited property from family members.
As we mentioned above, divorce is a separation of the emotional, the physical, and the legal. We believe that divorce is not necessarily an ‘end’ but a transition. Dealing with financial transitions like divorce requires help. Of course, your divorce attorney should be there at each step of the way to help guide you and give you support. That’s what our Dallas-based attorneys strive to do. Depending on your situation we might advise on how best to approach your current and future finances, including how to avoid costly financial decisions during your divorce.
The costliest decisions might come from decisions made about property division.
Quick Overview of Property Division
Texas is a community property state. This means that all income and assets acquired during the marriage are considered community property and will be divided upon divorce. It doesn’t matter whose name is on the paycheck, bank account, or car title; if it was acquired during the marriage, it is presumed to be community property.
“I don’t own the house, but I paid for it!”
If you acquired your house during the marriage, but it is not titled in your name, you will still likely have a community property claim for your interest in the property. Even if the home was owned by your spouse during the marriage, if you paid the mortgage during the marriage or made capital improvements to the residence, you may have a claim for reimbursement of community property funds that benefitted your spouse’s real property.
What options do I have for my mortgage?
We get questions related to mortgages, credit, and homes all the time. “Can I cash out on the house?” or “Can I use a line of credit to pay a divorce?” These types of questions are covered during the divorce process but if you want to get a better picture of your real estate and what your potential options are we’ve got you covered!
Is it better to divorce before or after retirement?
There is no magic answer when it comes to the ‘right time’ to divorce.
Divorce is a financial transition, and so is retirement. No matter what age or stage of life you’re at, maintaining the right perspective is essential. Especially during these big life changes. One thing you should ask yourself is: have you been saying “I’m getting ready to…” when considering divorce, planning for divorce, or trying to change your partner’s behaviors. Maybe the right time is simply up to you having faith that your current situation is not the best situation you can be in and you could do better without being stuck in an unhappy marriage. This is true for young couples and more mature ones.
Couples who divorce as they approach retirement encounter unique financial planning obstacles. They must navigate the division of assets accumulated over possibly decades and prepare for the financial implications of two separate retirements instead of a combined one.
Unique considerations for retirement
Whether you have a separation in mind or not, being informed of your finances is the best proactive defense to a messy situation. If you’re considering a divorce after 50 here’s what you should know.
- Assessing Retirement Funds: Individuals divorcing after the age of 50 must carefully evaluate their retirement funds, including 401(k)s, IRAs, and pension plans, as these assets are essential for securing their financial future post-divorce.
- Social Security Benefits: A non working spouse may be entitled to some benefits from the spouse who paid into social security during the marriage, dependent up on the length of marriage. In Texas, our courts typically do not take into consideration social security benefits, as that is not considered a marital asset that can be divided by a state judge.
- Health Insurance Coverage: Health insurance becomes a significant concern as one approaches retirement age. Those going through a divorce after 50 must evaluate their healthcare coverage options, especially if they were previously covered under their spouse’s employer-provided plan.
Big Questions have Big Answers
Feeling anxious is normal but taking a leap of faith is brave
Faith, trust, and courage are as necessary in a divorce as dotting your Is and crossing your Ts. We help our clients put their best foot forward, so that they’re ready before, during, and after the process.
We know divorce is an extremely personal matter. If you’re looking to find out more give our Dallas divorce lawyers a call today.
