Given the financial implications of divorce, it is not always an amicable affair. State laws on the matter of property division vary, and Texas has its own set of rules and regulations dictating the financial outcome of a divorce. However, there are certain fundamental pre-divorce financial planning principles applicable in most cases.
Gathering necessary financial information regarding jointly held assets and liabilities as well as separately held assets is essential for the purpose of ensuring an equitable distribution of property. It will also ensure a fair spousal support and child support calculation.
The prospect of property division may motivate a spouse to conceal assets and income. Copies of tax returns filed over the last 5 years may provide a definitive snapshot of an individual’s investments, income, and assets. Understanding and evaluating total personal net worth should be considered part of the process.
Evaluating personal and joint financial liabilities in the form of debts may also provide an edge during divorce proceedings. A joint credit report may provide the necessary information for this purpose. The recommended course of action at this stage is to cease accruing further debt and attempt to pay off as much of the current debt as possible before the divorce proceeding begins.
Additionally, there are tax implications of a divorce as well. Although on paper, the division of assets might look like an even 50-50 split, the reality could be very different. Maintaining or selling complex assets may have varying tax implications depending on the type of asset in question. An experienced family law attorney may be able to provide the necessary legal advice for navigating the labyrinthine process of property division.
Source: The Courier, “Financial items to consider during a divorce,” Byron W. Ellis, June 21, 2014
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