Marriage and divorce have become two words that are commonly uttered in the same sentence. What was once thought to be a lifelong commitment and partnership with another can deteriorate to the point where ending the relationship may become the only option. For many Texas residents, the financial aspect of what happens after the divorce is not given thought until the inevitable is looming on the horizon. Money is property and property division is part of the dissolution of a marriage. Preparing for the possibility of not staying married does not guarantee that a divorce will happen, but it does help to ensure that both parties are prepared should the unfortunate happen.
Reportedly, two-thirds of young married couples don’t have a financial plan in place should a divorce or death occur. This can leave many open to financial disaster. One suggestion is to be in contact with a financial planner when the talk of divorce or separation begins to become more than just talk. Having all the paperwork of debts owed, income, assets and retirement accounts is crucial to making sure that everything is laid out and can then be divided according to Texas community property laws.
Many separating couples fail to think about individual retirement accounts when considering divorce proceedings. If the money earned and saved occurred during the marriage, the IRA can be split by a divorce decree and will not incur capital gains tax. Understanding how different retirement accounts can be split is important to ensuring that both parties leave the relationship in a monetary state that allows both ex-spouses to be self-sufficient.
Texas couples who are contemplating marriage should understand the financial ramifications that a divorce or death could create. Having in place a financial contingency plan can offer peace of mind. Each intended, with the advice of an individual attorney experienced in property division, can begin to set in place a safety net for future financial security should the unexpected happen. For those going through or contemplating a divorce, an attorney can help one navigate the complicated disentanglement of assets.
Source: thestreet.com, “How Divorce Affects Social Security and Retirement Accounts“, Robert Powell, Dec. 15, 2017