Fabio & Merrill

Houston Divorce Blog

Dividing up the 401k during divorce proceedings

Many of those entering into their divorce proceedings in Houston do not anticipate having to include their 401k accounts as part of the process. Yet contributions made to such an account during one’s marriage come from marital income; thus, while the total value of the 401k may not be subject to property division, those contributions are. This prompts many to question how one is to divide the funds from a 401k if the account holder is not yet at the age of retirement.

Typically, an early withdrawal from a tax-deferred retirement account will invoke a penalty (which can be as much as 10 percent of the distribution). Yet per CBNC.com, divorce is one of those rare circumstances where such a withdrawal can be made without a penalty. The court hearing the divorce case issues a Qualified Domestic Relations Order, which authorizes a plan provider to make disbursements to an alternate payee (which in the case of a divorce is the non-contributing spouse).

Community property and your LLC

Texas business owners who divorce must be very mindful of the process of dividing the debts and assets from the marriage. The reason for this is that Texas is one of the few states that follow a regime of community property.

As with most legal situations, there are pros and cons associated with divorcing in a community property state, as each spouse has the right to walk away with 50% of the assets from the marriage.

Is divorce financially harder on women than men?

If you are a married woman in Texas who is contemplating a divorce or who maybe is already in the throes of a divorce, it is important that you fully understand the potential financial risks you face for your future. Every decision you make during your divorce negotiations may have long-lasting financial ramifications for you. 

According to a report from Bloomberg, it seems that women in particular may experience serious financial problems after getting divorced. The problems associated with lack of financial security are worse for women who get divorced after the age of 50 than for women who get divorced at younger ages. In looking at women who were 63 or older and who got divorced in their 50s or later, the rate of poverty was nearly 27%. For women who got divorced before the age of 50, the rate of poverty was 18.6%.

Make sure you include all marital property in a divorce

There are many factors to negotiate when filing for divorce in Texas. Property division, however, may be one of the most complicated. People grow attached to their property and possessions, and it can be difficult to separate those items in the divorce settlement. Texas is a community property state, meaning all marital property is divided equally in half between spouses. It is critical that people understand what marital property is so they can be certain to get everything they are entitled to in the divorce settlement. 

When thinking of marital property, the family home, furniture and vehicles may come to mind. Yet, there are many other less commonly thought of items that should be divided in the divorce settlement as well. These include the following:

Are second and third marriages more likely to fail?

When you exchange vows with your future partner, the last thing you want is to file for divorce a few years or decades down the road. However, the phrase, ‘till death do we part,’ may not always hold true in some marriages. In fact, according to the Centers for Disease Control and Prevention, more than half of all marriages end in divorce. This high statistic may seem unreasonable; yet, many people are quick to file for divorce when a problem arises or when people grow apart from each other and decide to go their separate ways. 

When this happens, it is likely that you may remarry and hopefully, this pairing will fair better than the first. Statistics show that the chances of filing for divorce a second or third time are great. While 50% of first marriages end in divorce, 67% of second marriage are expected to have the same fate. Furthermore, if you choose to marry a third time, you have a surprising 73% chance of filing for divorce then. Why is there a greater chance of divorce with each marriage?

Protect separate property in divorce with a postnuptial agreement

When it comes to matters of divorce and property division, you're likely to have a variety of questions and concerns.

While there are sure to be many assets that are subject to division, separate property shouldn't be among them. This is defined as property that you solely own, likely because you brought it into the marriage.

Debt, divorce and your future creditworthiness

Married residents in Texas who separate or divorce their spouses have many things to contend with in the process of extricating themselves from a previously shared life. The need to identify future ownership of marital assets is a topic that often gets a lot of attention at this time. However, it is important to remember that debts as well as assets must be split in a divorce.

CreditCards.com recommends that divorcing spouses make it a priority to find a way to settle all joint debt prior to completing their divorce. This will allow both parties to walk away from the marriage without being bound together by a financial responsibility to a lender or other creditor.

Dividing assets in a gray divorce

As a Texas resident who is navigating a divorce at a later stage in life, you may have certain matters you need to work through that younger people facing similar circumstances may not. At Fabio & Merrill, we understand that the older you are, the more assets you typically have amassed between you and your spouse. We also understand that couples navigating “gray divorces” may have more assets between them that they need to divide than younger couples, or couples who recently married.

According to Kiplinger, the number of people splitting from their spouses later in life is on the rise, with the divorce rate for couples over 50 doubling since the 1990s. Many divorcing parties who fall within this age range do not fully understand what will happen as far as their retirement and other accounts, and they sometimes find themselves in a difficult position when they realize they may have to share the assets inside them.

Do you need a forensic accountant on your divorce team?

When you navigate your way through a Texas divorce, you will undoubtedly experience a wide range of emotions. Once you take your emotions out of the equation, however, you will need to figure out the fundamentals about how you plan to divide up shared assets and debts. Increasingly, divorcing parties who have considerable assets or particularly complicated finances are finding that hiring forensic accountants can help them navigate complicated financial aspects of their divorce cases.

Just what does a forensic accountant do, and how might hiring one benefit you in the future? According to Forbes, forensic accountants are essentially accounting specialists who can potentially assist you as you work through any number of financial matters pertaining to your divorce.

Divorcing in 2019? Know this new tax law

When you split from your Texas spouse, you can anticipate that doing so will impact numerous aspects of your life, potentially affecting everything from where you live and whether you work to how often you see your own children. At Fabio & Merrill, we recognize that a new tax law that took effect at the beginning of the year may also have a notable impact on your divorce proceedings, provided at least one party involved the divorce plans to pursue alimony.

Per Forbes, one of the biggest and most notable tax law changes that went into effect at the beginning of the year involves alimony payments. If you plan to seek alimony from your former partner, or conversely, if you believe your ex plans to seek alimony from you, it is important that you understand how paying or receiving alimony will affect you, come tax time.

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