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Dealing with complex finances in a divorce

On Behalf of | Sep 14, 2020 | Divorce |

When people in Texas get a divorce, they must be completely transparent with one another about their assets. This is especially essential when dividing their property. It can be easy to misunderstand or overlook some assets, and in some cases, one person might try to conceal them.

Work-related assets

Business owners who have made payments to contractors without generating a tax form may be trying to reduce the value of their businesses by using company funds for personal expenses. Business deductions may also need to be scrutinized. Employer-purchased life insurance policies should be reviewed. One of the more complex assets to deal with in a divorce is equity-based compensation, such as stocks and partnership interests. There is no one standard approach to valuation, so there may be a great deal of information-gathering involved.

Other assets

Some people may try to hide assets by giving them away to family members or claiming that some of the money they have is a loan from a family member. In the former example, gifts that exceed $15,000 generate tax issues. In the latter example, the “loan” may need to be considered part of the estate if it does not include a document specifying interest. Other potential areas of conflict or confusion are a child’s 529 savings account and the amount that capital gains tax on an asset reduces its value.

It is required that marital property be divided equally in Texas since it is a community property state. Some couples prefer to attempt to negotiate an agreement regarding property division without going to court. This can give them more control over the divorce settlement, and it can be less costly than litigation. However, it is important that individuals fully understand the value of their marital assets, particularly if each person is taking certain assets in whole instead of splitting them all 50/50.