Divorce Finances - What to Know
Divorce is a complex and emotionally charged process that can take a toll on everyone involved. One of the biggest factors to consider is finances. While many couples may have a general understanding of their joint financial situation, it's essential to take a deeper look at the financial implications of divorce. From dividing assets and debts to negotiating spousal support, this process can be overwhelming and confusing. In this blog post, we will explore some crucial aspects of finances that everyone going through a divorce should know. Whether you're just beginning to consider divorce or already in the process, read on to learn some essential tips to help you navigate these complex financial issues.
1. Cost of Divorce
The cost of divorce can vary greatly depending on several factors. The first factor is the complexity of the divorce. It costs more when there are many assets, like real property, investments, and retirement accounts. Parties may need to hire experts to determine the value of businesses or property, which increases costs. Additionally, if there are children, issues such as custody and support can add to the cost. The second factor is the type of divorce. If the couple agrees on all issues and can obtain an uncontested divorce, the cost will be lower. However, if the divorce is contested and requires litigation, the cost will be much higher due to attorney fees and court costs. The third factor is the location of the divorce. Different counties in Texas have different "going rates" for practicing lawyers in the area. The courts may also have larger caseloads on their dockets, causing the process to take longer to bring to a close.
2. Financial Planning During Divorce: Protecting Assets and Preparing for the Future
Financial planning should be a priority to protect your assets and prepare for the future. Dividing assets and liabilities can be a complicated process, but focusing on key financial considerations can make the transition smoother. These considerations include spousal support, child support, property division, retirement accounts, and Social Security benefits. To make important decisions and reduce emotional stress, it's essential to hire the appropriate professionals, such as a divorce financial advisor, a family law attorney, or a therapist. Remember, the more thorough you are in gathering information, the better and more accurate your financial plan will be. [1][2]
3. Division of Assets and Liabilities: Practical Solutions to Key Financial Considerations
When going through a divorce, it is essential to determine how assets and liabilities will be divided between you and your former spouse. To ensure a successful transition, focus on practical solutions to financial considerations. If one spouse is the primary income earner, spousal maintenance payments may be necessary if available under the law. You should also decide how to divide your primary residence, considering costs related to upkeep and potential costs for selling the house. Retirement plans should be split equitably, and Social Security benefits should be understood, especially for those over 50. Keep in mind that laws may vary by state. [3][4]
4. Spousal Mainenance and Child Support: Addressing the Needs of Non-Earning Spouses and Children
When it comes to divorce, spousal maintenance and child support are crucial issues that must be addressed. Spousal support, also known as maintenance, is given to a spouse who earns less or doesn't earn anything. Its purpose is to help them meet their basic needs. It should not be confused with contractual alimony, which is not recognized in Texas courts (but can be contractually agreed to by the parties). In Texas, to decide if a spouse can receive support payments or not, courts consider things like the length of the marriage, both parties' income and job potential, and if either spouse played a part in the marriage ending. Child support, on the other hand, is intended to provide for the children's basic needs, such as food, housing, and medical care. The amount of child support is determined by state guidelines based on factors such as the parents' income and the number of children being supported. It's important to ensure that both alimony and child support are paid timely to provide a stable life for the non-earning spouse and the children. [5]
5. Dividing the Primary Residence: Making Equitable Distribution Choices for Better Financial Outcomes
When your primary residence during a divorce, it's important to make equitable distribution choices for better financial outcomes. If one spouse wishes to keep the home, the other may need to receive a larger share of another asset to make the distribution fair or they may get what is called an "owelty lien" to secure a debt on the house, which the party keeping must make payments on to "buy out" the other side's equity. Consider the costs of maintaining the home and who will pay for any necessary repairs. Courts typically don't discount a house's price when for projected realtor fees for eventually selling the house when one side is keeping the residence. Keeping these factors in mind can help ensure a fair distribution of assets during a divorce. [6]
6. Social Security Benefits: Claiming Spousal Benefits Based on Ex-Spouse's Earnings
If you are age 62 or older and were married to your ex-spouse for at least 10 years, you may be eligible to receive Social Security benefits based on their earnings record. The amount you receive depends on your own retirement benefit determined by your own earnings record and your ex-spouse's benefit. You cannot receive both benefits but will receive the higher amount. If your ex-spouse has passed away, you may be eligible for widows benefits. These benefits are available even if you are still working, but there is a limit to how much you can earn and still receive full benefits. [7][8]
7. Prenuptial Agreements: How They Affect the Division of Marital Assets
If you and your spouse signed a prenuptial agreement before marriage, it will affect the division of your marital assets during divorce. Prenups can include provisions for an unequal distribution of assets, even overriding the presumption of a 50/50 split under state law. However, prenuptial agreements can be challenged in court by either party, particularly if there was not full financial disclosure or if one party signed under duress. With a valid and enforceable prenup, the agreement will dictate how your assets and liabilities are divided in your divorce. Consult with a family law attorney for guidance.
8. Updating Bank Accounts: Protecting Credit Scores and Making a Clean Financial Separation
As you go through a divorce, it is crucial to update your bank accounts to protect your credit score and make a clean financial separation from your ex-spouse. Open new individual checking and savings accounts to use for future deposits and expenses. Redirect any direct deposits and update automatic payment information (making sure you would not violate any court injunctions first). Doing this early is a good way to keep your credit score healthy, as a spiteful ex-partner can potentially damage it with overzealous spending. Remember that you must approach each joint credit agreement with the lender separately to remove your name from the account or pay off the balance and close the joint account. [9][10]
9. Collecting Pertinent Information and Documents: Establishing a Clear Accounting of Financial Situation
To properly manage your finances during and after a divorce, it is crucial to have a clear and accurate accounting of your financial situation. This includes gathering all relevant financial documents such as bank statements, credit card statements, bills, investment portfolio statements, and any debts or liabilities. With this information, you and your former spouse can determine how much money each person will need to maintain your current standard of living. Mediation may be a helpful first step, but legal advice from a divorce and family law attorney may be necessary if financial matters cannot be resolved by mutual agreement. [11][12]
10. Planning Your Financial Future after Divorce
After a divorce, it's important to develop a comprehensive financial plan to ensure your financial security for the future. Here are ten tips to help you kick-start your financial planning process. First, create a post-divorce budget and focus on essential expenses. Second, close all joint accounts with your ex-spouse. Third, change the beneficiaries on your accounts - failing to do so could result in your ex-spouse inheriting your assets upon your death. Fourth, update your insurance coverage, including home, car, jewelry, and artwork. Fifth, create an emergency reserve fund to cover unexpected expenses. Sixth, consider getting a financial advisor to help you manage your finances. Lastly, don't forget to update your estate plan, including your will and any trusts you have. [13]
11. Considering Mediation as an Alternative to Court Proceedings
If you and your spouse are considering divorce, mediation may be a suitable alternative to traditional court proceedings. With divorce mediation, a neutral third-party mediator helps you and your spouse reach an agreement on key issues such as child custody, asset division, and spousal support. Mediation is often less expensive and less time-consuming than going to court. Additionally, mediation can help keep the process less adversarial and more focused on compromise and finding solutions that work for everyone involved. Consider mediation as an option for a smoother and more peaceful divorce process. [14][15]
Conclusion
In conclusion, there are various considerations to keep in mind when divorcing. That is why hiring a knowledgeable law firm, like Longino Law, can be incredibly helpful. A divorce attorney can provide personalized guidance and support throughout the entire process. They can help you navigate complex legal issues, protect your assets, and ensure that your rights are protected. Longino Law was founded by Tristan H. Longino, a Board Certified family lawyer, who also served as a family court judge in Harris County, Texas, and was a financial advisor before becoming an attorney. By working with experienced divorce lawyers, like Longino Law, you can minimize stress, streamline the process, and achieve the best possible outcome for yourself and your family. Contact us today.
© 2023 Longino Law, PLLC. All Right Reserved
(713) 634-7375
M-F 8:30am-5pm