• 26
  • August
    2010

When it comes to divorce in Texas, there are really no simple solutions. Fortunately, there are steps that you can take to avoid future complications, as well as mitigate the potential financial consequences of a divorce.

Today's post is the second in a series. It will discuss steps that you can take to help reduce the financial impact of a complex divorce.

Post continued ...

Take the time to explore tax issues

Once your complex divorce is finalized, you will more than likely find yourself responsible for spousal maintenance and child support payments. While you may have already created a budget and calculated how you plan on making these payments, it is also very important to account for any tax consequences.

To illustrate:

• Did you know that the spouse who pays spousal maintenance may generally deduct the amount paid from their taxes?
• Did you know that the spouse who receives spousal maintenance must generally pay taxes as it is treated as taxable income?
• Did you know that child support is not deductible and is not treated as income by the IRS?

Consider speaking with an experienced legal or financial professional to learn more about the applicable tax rules and regulations.

Account for your debts

It is important to understand that both you and your former spouse remain responsible for jointly held debt after the divorce is finalized. In the eyes of creditors and (more importantly) the law, you are both held responsible.

"A divorce decree might say he gets all the joint credit card debt, but that's not going to get her name off of the account and that's not going to relieve her of responsibility if he defaults on them. What most people don't understand is the fact that a loan agreement or credit card agreement will not be trumped by a divorce decree," said Fadi Baradihi, CEO of the Institute for Divorce Financial Analysts.

If you and your former spouse agree to maintain jointly held accounts until your divorce is finalized, be certain that all payments are made in a timely fashion. In addition, you may also want to consider paying down as much debt as possible in order to avoid future financial complications.

Examine financial statements

If you and your former spouse have sizeable assets or own a business together, it is very important that you take the time to review financial statements. You need to be certain that your former spouse is not mishandling or misappropriating assets/funds.

When you examine financial statements, look for questionable write-offs, strange purchases made in the name of the business, and unreported/underreported income.

Consider speaking with an experienced legal or financial professional to learn more.

The following post is provided for informational purposes only and is not to be construed as legal advice. Be sure to contact a legal professional if you have questions or concerns regarding a family law matter.

Stay tuned for more in the next post from our Tarrant County divorce blog ...

Related Resources:
  
• 10 Ways to Avoid Divorce Disaster (Bankrate.com)