• 01
  • September
    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 final in a series. It will discuss steps that you can take to help reduce the financial impact of a complex divorce.

Post continued ...

Safeguard your investments

A qualified domestic relations order (QDRO) may prove necessary if retirement accounts (i.e., 401(k)s, profit-sharing, IRAs, pension plans, etc.) held by you and/or your former spouse are going to be divided in the divorce.

What exactly is a QDRO?

In essence, a QDRO is standard, fairly complicated language that is inserted in final divorce papers. It gives a former spouse the legal right to receive one of the following: a set percentage of the balance of a retirement account or a set amount of payments from a retirement account.

Accordingly, a QDRO allows a former spouse to withdraw their share of the retirement plan and roll it into a tax-free individual retirement account (IRA).

Please note, failure to have a QDRO in place can result in serious tax consequences for the recipient spouse. A legal professional can explain how a QDRO works and whether your situation calls for one.

Take the time to establish a budget

The importance of creating a budget cannot be overstated. It simply doesn't matter whether you were the breadwinning spouse or you let your spouse earn all of the household's income. You will need to account for your post-divorce finances, including your needs and your debts.

A proper budget can help you better understand what financial sacrifices and adjustments need to be made.

To illustrate, if you were ordered to make child support or spousal maintenance payments, creating a budget may help you realize that you need to forgo certain expenditures or secure a better-paying job.

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 complex divorce.

Stay tuned for more from our Tarrant County divorce blog ...

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