Property Division in Divorce
Dividing assets and liabilities is a stressful part of the divorce process for many. There can be uncertainty about what should be divided and how, not to mention the worry about financial security moving forward. Below is some basic information to help you be prepared for this part of your journey.
First and foremost, understand that Texas is a COMMUNITY PROPERTY state. This means that most of the assets and liabilities (debts) will be divided equitably during a divorce. SEPARATE PROPERTY is not divided during a divorce. Simply put, community property consists of assets acquired during the time of marriage, no matter who earned it. Separate property is any property acquired prior to marriage. Also, inheritance, gifts, and personal injury settlements are considered separate property and are not subject to division in most cases.
To prepare for dividing assets and liabilities, it is important to start gathering information as soon as possible in the process. It’s good idea to gather 3-6 months of statements for every account, whether held jointly or in the name of only one of the spouses. Ultimately, it is important to know every dollar owed and every dollar held in any account. The balances and the account numbers will be required to prepare the documents necessary for the divorce.
Couples who can work on the financial issues together come out way ahead. Some are able to eliminate debts, divide accounts, and even refinance property ahead of mediation or court hearings. They generally save hundreds or thousands by avoiding time spent in adversarial proceedings down the road.
Retirement accounts must be included in the division of assets and are not always easy to divide. Given the fact that there are so many types of retirement accounts and that they were designed to be distributed later in life, the division of these accounts can be complex. When a retirement account needs to be divided, decisions need to be made about whether the funds will be distributed immediately or at the time of retirement. If the account was established prior to marriage but contributions continued after marriage, the funds could be partially separate property and partially community property. It is important to define in the Mediated Settlement Agreement how the funds are to be divided. Often it is worth the time and money to consult with a QDRO attorney for help with this complicated issue. Most mediators and divorce attorneys are qualified to help outline HOW to divide the accounts, but will generally refer clients to a QDRO attorney for the actual division.
In the case of complex financial holdings or in cases where hiding assets is suspected, it might be a good idea to consult a CDFA, Certified Divorce Financial Analyst. While that is not necessary for most, many couples own a business together or have extensive assets. A CDFA can help ensure that the assets and liabilities are properly assessed and divided.
The decisions made during a divorce will affect you for a lifetime. Take your time and be thorough as a bit of effort now will help avoid mistakes and regret. Please contact Barahona Consulting & Mediation if you would like to discuss your divorce options.