Spouses in Texas who are getting divorced should consider certain steps to protect their financial interests. These steps range from creating a post-divorce budget to changing passwords when needed to understanding what the divorce is likely to cost and how that cost will be paid.
The process of developing a post-divorce budget can be simple while contemplating property division can be complicated. For example, it’s important to understand which assets carry significant tax obligations since the actual value of those may be worth less than it appears. Higher-earning spouses may want to keep assets that have fewer tax obligations since they will already be in a higher tax bracket. Another consideration is the liquidity of certain assets and how important that liquidity may be to each individual. An attorney can assist with decisions about a property division that will benefit you, or can refer a you to the appropriate trusted financial consultant, to assure these factors are considered in the final division of property.
Debt existing in both spouses’ names is best paid off before the divorce is final. However if a co-owned debt ends up being one spouse’s responsibility, the other spouse may want to request ongoing access to the account’s records to ensure it’s paid. Whether or not that debt is tax-deductible (such as a mortgage) can also factor into the division of liabilities.
There are also other financial issues that soon-to-be exes tend to overlook. For example, parents of older children should discuss how they will pay for college, and who will be responsible for any expenses not covered by scholarships. This may be a shared expense, with each party contributing a certain amount or percentage of expenses. Or one party may agree to set up a trust to fund the costs, allowing the funds to grow until needed. Who will manage any college savings plans, or 529 plans, should be addressed as well.
Spouses paying or receiving child support should plan for the unexpected, such as the death of the child support-paying spouse. A life insurance policy may be a good solution to assure that the funds for the child(ren) will be there in the event a tragedy occurs.
Certain financial documents should also be updated after divorce is final, such as wills, property titles, and insurance and retirement fund beneficiary designations. Many counties have Standing Orders in place to prevent any beneficiary changes while the divorce is pending, but once it is final, these should be tended to fairly quickly.
Financial institutions should timely be notified of any address changes to assure continuity of statements and notifications. The Social Security Administration should also be notified so you will continue to receive projected retirement earnings statements.
These steps may feel overwhelming for someone who is going through or who has just finished going through the emotional turmoil of a divorce. Nevertheless, a divorcing spouse should gather financial documents such as tax returns and financial statements and discuss their particular situation with an attorney to protect their interests, their children’s interests, and their business interests. An attorney can assist in planning a strategy for negotiating a settlement or going to court if needed.
If you are in need of guidance regarding your financial situation in or after a divorce, Hargrave Family Law is here to help.