What to Expect Financially
When a marriage ends, the financial union does, too. You can expect your assets and debts to be identified and valued, and if they are categorized as marital property, they will likely be divided. Texas is a community property state, meaning any assets acquired during the marriage are considered jointly owned and are subject to division upon divorce (unless an existing marital agreement stipulates otherwise). This includes income, real estate, investments, and even debt.
Whether you are the breadwinner, a stay-at-home spouse, or a parent, it is essential to approach a divorce with a clear strategy for protecting your finances.
Understanding Property Division
The courts in Texas aim for an equitable division of assets. This does not always mean a 50/50 split of shared property. Divorcing couples also have the option to negotiate their own property and debt division agreement and submit it to the court for approval.
When litigating property division, the courts may also consider several factors, including each spouse's:
- Earning potential post-divorce
- Health
- Education and training levels
- Contributions made to the marriage (including homemaking and childcare)
- The court may also consider who was at fault for the dissolution of the marriage (if the divorce was filed on fault-based grounds).
What This Means for Your Finances Post-Divorce
Understanding how the court views property division is critical to understanding how your divorce may impact your financial stability now and in the future. It can be especially crucial if you are a stay-at-home spouse or parent considering divorce, as it can help you better understand your rights to shared marital property.
Additionally, because Texas views assets required during the marriage as shared property, regardless of whose income was used to acquire them, whose name is on any deeds, or whose name is on the associated accounts, you cannot assume that significant assets will remain intact post-divorce.
Common assets that are frequently divided or sold during divorce proceedings to facilitate property division requirements include:
- Real estate, including the primary residence, vacation homes, and rental properties
- Vehicles, such as cars, motorcycles, boats, and RVs
- Financial assets, including bank accounts, stocks, bonds, and investment portfolios
- Retirement accounts, like 401(k)s, IRAs, and pension plans
- Business interests or shares
- Significant personal property items, such as valuable furniture, electronics, jewelry, and collectibles
- Artwork and antiques
- Life insurance policies with cash value
What About Spousal Support or Spousal Maintenance?
Though similar, in Texas, spousal support and spousal maintenance are not quite the same thing. Spousal support is a voluntary agreement between divorcing spouses that one spouse will make payments to the other in a specified amount and for a specified duration post-divorce. Spousal support is usually negotiated between the parties as part of a divorce settlement.
Spousal maintenance, on the other hand, is court-ordered. Spousal maintenance is not automatic; it is decided individually, case by case. Additionally, spousal maintenance is enforceable by the court, whereas spousal support can only be enforced as a contract.
There is no set formula for calculating spousal maintenance orders, but Texas law does set limitations on it. The courts cannot require someone to make spousal maintenance payments exceeding $5,000 or 20% of their gross monthly income, whichever is the lesser.
How Spousal Maintenance Laws Might Impact Your Financial Stability
Your spousal support or spousal maintenance settlement can significantly influence your financial stability following a divorce. Depending on the court's decision or whatever voluntary agreements you and your soon-to-be ex-spouse enter, these payments can provide crucial financial support to a lower-earning spouse. Conversely, they can also place significant limitations on the financial abilities of the paying spouse.
As such, spousal support and maintenance orders have the potential to affect both parties' financial planning and stability post-divorce significantly.
Protecting Yourself Without Raising Red Flags
During a divorce, protecting your financial interests without giving the impression that you're trying to hide or wrongfully deplete marital assets is essential. Transparency is key.
Commonly recommended tips for protecting your financial interests during a divorce include:
- Open a separate bank account: Start by opening your own bank account if you haven't already done so. It's practical to have a place for your earnings post-separation and to manage your personal expenses independently.
- Document everything: To avoid misunderstandings or accusations about asset dissipation or misappropriation, keep immaculate records of all transactions and financial moves from when the decision to divorce is made.
- Refrain from making large purchases: There might be a temptation to make large purchases or sales during this uncertain time; however, courts will look closely at this behavior as potential asset dissipation. As mentioned above, keep clear records of any major financial transactions you instigate post-separation and before your divorce is finalized.
- Get a financial advisor: A financial advisor who provides services to divorcing couples can be invaluable during this time.
Knowing how to conduct yourself financially during a divorce can be incredibly challenging. We encourage you to seek guidance from finance professionals and to communicate with your attorney when questions or issues arise.
Moving Forward
Divorce signals both an end and a beginning. While the process is inherently complex, especially regarding financial matters, please know you are not alone. The Law Firm of Johnson & Gaskill PLLC is ready to help. We are committed to helping you understand your property rights so that you can work to protect your financial present and future, even in the face of a difficult divorce.
If you're considering divorce, contact us for a strategic approach tailored to your unique situation. Contact us online today.