Getting a divorce is stressful, understandably, as a Texas family lawyer can attest. Most of the stress comes from the worry for your children and how they will handle it all. The next worry on the list is usually the financial aspect of the divorce. Most people harp on this aspect but may not actually know what all the “financials” include when heading into, through or post-divorce.

The standard application and determination for division of community property and the tracing and proof concerning the confirmation of separate property in divorces can be complicated and messy, both from a personal and a financial standpoint. Again, we understand this can be a stressful process and sometimes it’s easier to just do what you feel is right and just even though it’s not.

The following financial considerations are important, as divorce and credit can mirror each other. How you proceed before, during and post-divorce can affect your financial standing for the future. It is still the responsibility of each party to ensure that all payments for the mortgage, rent, utilities, loans, and credit cards are made in a timely manner to avoid delinquent accounts in the future. One option you may want to consider is to freeze or close joint credit accounts, or request the creditor to split into individual accounts that way the person who will ultimately be responsible for the debt can eliminate post-divorce hassle.

  • Try to avoid unrealistic expectations. Parties often forget that their living expenses typically double when they separate. The same income now must support not one, but two households, and it is not uncommon for things to get tight for a period of time. While these expenses must be paid, it is typically a strain on both parties to pay and assume these expenses, which must be considered by both parties.


  • Dividing Marital Assets. The biggest financial considerations center on dividing the assets. Because not all assets are created the same, you need solid information when deciding how to split everything. The consequences of not understanding and finding out when it is too late can be financially and emotionally devastating!


  • Attempt early to untangle any joint finances. The sooner you can separate yourself financially from your spouse’s ability to use or borrow resources, the better off you will typically be. If your spouse fails to make a timely payment on a joint debt, that stain can show up on your credit report, and the creditor will likely look to you for that payment. You will still be liable to the lender if your name is on any jointly held debt of any nature which your spouse fails to pay. The fact of the judge assigning that debt to your spouse for payment will not relieve you of previously executed agreements with creditors on debt obligations.


  • Try to keep perspective on the “numbers.” It is important for the marital estate to be divided fairly between the parties, which generally means a consideration of the relative positions of the parties and their abilities to support themselves, first, and an evaluation  of the reasons for the ending  of the marriage relationship, second. While Texas law does not require an equal distribution of property between the spouses, and the standard for the judge to follow in the division of the marital estate is whatever the judge determines to be “just and right”.  Our experience is that the end of most marriages results in a fairly even division of property, with the spouse who earns at a lower rate of return having, typically, a higher percentage of the property division award. However, there will always be some assets which are better suited being divided to one spouse than the other, and in some cases it makes sense to use a different distribution to accomplish other necessary goals. Additionally, there are instances in which, one spouse may benefit from taking less of the marital estate in exchange for a larger amount of spousal support (alimony).


  • Remember that a divorce has an effect on your job and your career. In many marriages, one (or both) spouses have made career sacrifices -­ either for each other or for their children. In these situations, it takes time for that spouse to be in a position to earn an income comparable to the other spouse, if ever. Keep this in mind when you are going through a divorce, because in most cases, the parties do not have an equal financial standing at the outset.


  • Remember to consider tax implications in your property decisions.  Many issues in divorce cases have tax consequences, and many of those do not show up until after the fact of the divorce. Examples can include alimony payments, dependency exemptions, and capital gains issues. Parties are well served by having an accountant available to discuss these issues before the issues mature. We strongly encourage every client to retain and have the continued advice of a competent accountant of your own choosing.


  • Filing Your Taxes. If you are separated, you can file your taxes separately as “Head of Household”. Decide who gets to claim the children as dependents, which can also be a negotiation tool. Keep this deduction if at all possible; it can mean money in your pocket with the earned income credit. Make sure that both parties do not try to claim the children, the last thing you need is an IRS audit.


  • Insurance Coverage. If both names are on a policy, and your spouse has an uncovered liability, you can be held responsible. The best financial consideration is to take your husband’s name off the policy, or get your own policy (and take your name off his). If you don’t already have an insurance provider, you can shop for the best insurance rates online.


Thanks to our friends and contributors from Brandy Austin Law Firm PLLC for their insight into financially planning for your divorce.