Are you to the point of no return in your marriage? Nothing left of feelings, just apathy or indifference. Do you feel you must leave this place now or die trying? What about your financial security after the divorce? Divorce is an emotional roller-coaster. How will you take care of your debt, bills, and your children’s needs?
Time to grab your laptop or pad of paper and start thinking smart about “the first day of the rest of your life. If your “I need a divorce” decision is now made, start work on learning your current family financial situation and what needs to be done to secure your financial security for Post-Divorce life!
Here is a list of some of your most important Financial Information that you need to address before the Start of the Divorce
- What are the Community and Separate Property Laws in Texas?
Under the Texas Family Code, a spouses separate property consists of 1) the property owned or claimed by the spouse before marriage; 2) the property acquired by the spouse during marriage by gift, devise, or descent, and 3) the recovery for personal injuries sustained by the spouse during marriage, except any recovery for loss of earning capacity during marriage.
The terms “owned and claimed” as used in the Texas Family Code mean that where the right to the property accrued before marriage, the property would be separate. Inception of title occurs when a party first has a right of claim to the property by virtue of which title is finally vested. The existence or nonexistence of the marriage at the time of incipiency of the right of which title finally vests determines whether property is community or separate. Inception of title occurs when a party first has a right of claim to the property.
Everything you and your spouse have earned in your marriage except for personal gifts or property from devise or descent will now, absent fault, be divided equally in the divorce. This could make a big difference in your post-divorce financial life! Gather all financial statements: income tax returns, insurance policies, bank statements, Investment Accounts summaries, Retirement Account balances, Bills, anything in your marriage that can show who owns separate assets or what constitutes the community property in this marriage.
2. DEBT: Deal With it NOW!
Are you and your spouse in a bad financial situation? Do you both have to work to pay the bills or just barely make ends meet? Now you want to get a divorce and HOW IS THAT GOING TO WORK? How can you be Post Divorce Happily EVER AFTER when you may not even be able to afford a down payment on an apartment?
ORDER A COPY OF YOUR CREDIT REPORT now to see where the damage may exist. You will be able to see what credit cards, loans, and other debt you all have created. If you and your spouse have be leading “separate lives” for a while, you may be surprised when there is more debt incurred for entertainment you never knew about.
Review this CREDIT REPORT carefully. Find out whether you are a joint owner or just an authorized user. Except for your home, usually the DEBT will be in existing credit card accounts, personal loans, and car loans. If possible, try to get as much debt as possible paid off before finalizing the divorce. Remember that joint debts remain both spouses’ legal obligation to the lenders, even when the divorce settlement states that only one spouse is responsible for the debt. If the responsible ex-spouse defaults on the payments, it will show up on both ex-spouse’s credit history.
Some good advice? Get your own credit card in your name only. If you keep other credit cards take your spouse’s name off the credit card Now! Get your name off any credit card that your spouse uses NOW! Divorce causes financial upheaval to a family’s budget so protect yourself, so you don’t have to pay or be legally responsible for your soon to be EX’s Bills!
3. Bank Accounts
Most married couples have at least one joint bank account. Many will have joint checking and savings accounts. You need to get a record of every family bank account in existence. Make sure you have copies of all monthly bank statement for 3 years.
Review these carefully and see if there has been a constant drainage of money from the accounts.
Now open a new account in your name. It is critical to establish your own financial identity when you divorce.
If your spouse does business with the bank in a business capacity or you have car/personal loans with the bank, you need to open a personal account with another bank of your choosing.
4. What About Our Home?
One of the hardest assets to deal with in a divorce. This is where the couple lived as a family, with or without children. If there are children involved, their little lives have centered around their schools, churches, sports teams and friends. It is heartbreaking to the entire family, but this decision is usually the final family break.
If the decision is for one spouse to take over the homestead and debt, the ideal situation is for such spouse to refinance the home in only their name. The single spouse will be responsible for the debt on the house and full title on the house. Otherwise if the spouse can’t afford to refinance the house, both spouses will have to work out a co-owner agreement and continue to have both names on the title and share the large financial burden. In such event, frequently, sale of the home is the best option.
This is one of the most serious real estate problems we encounter in a post-divorce situation. Times get tough and the ex- spouse, who took over the house debt, cannot afford to pay the mortgage and the property falls into foreclosure, affecting both ex- spouses’ credit. Sometimes it is better, if one spouse cannot refinance the house loan, to sell the house and divide the proceeds.
Other “To Do” Items to Address Before the Start of the Divorce
- Make sure your assets are protected. Check that your car, health, and homeowner’s insurance is up to date and enough for your and your children’s needs. Also start the process of changing beneficiaries on all life insurance policies/annuities and retirement accounts (IRA / 401k at work) you own from your ex-spouse to your heirs or other designees.
- Change all passwords on your online accounts and all banking and credit card accounts. Time for some personal privacy!
- Time to start thinking about your digital assets that you as a couple developed and shared? This is a community state and how will this affect this type of asset?
- Think about reviewing your will and other estate planning documents. We suggest that when the divorce is final, you need to have a new will in place that will be only your heirs minus your Ex.
- Very important! Establish your own credit in your single name
This list will give you a start on the financial items that you must be addressed immediately in an upcoming divorce. Be prepared before the divorce and know where you stand financially. This will hopefully give you time to talk with financial and legal experts so you can make wise decisions on addressing the financial aspects of the divorce for you and your other family members.
The Nacol Law Firm P.C.
Many professions create impositions on conservators making a standard possession order inapplicable and unworkable. The Court may deviate from a standard possession order if the order is inappropriate or unworkable in reference to the schedules of both the conservators and the child. Unique professions and irregular school schedules for children allow the Court to have flexibility to deviate from a standard possession order that is in the Best Interest of the Child. There are multiple ways in which the Court may depart from a standard possession order to fulfill the needs of all parties involved with the custody of the child.
First, the Family Code § 153.254 states that the Court will be allowed deference to modify the standard possession order if work schedules of either conservators or the school schedule of the child is irregular. The Court must attempt to narrowly tailor the modifications to keep the new possession order as similar to the standard possession order as possible. This instance most commonly occurs when the Managing Conservator and the Possessory Conservator cannot reach an agreement and one of the two Conservators has a unique profession such as a firefighter, police officer, or airline pilot. The working hours of these jobs allow the Court to modify the standard possession order even if both of the parties do not comply with the changes. The modifications must be made only if it is in the Best Interest of the Child.
Secondly, the standard possession order may always be modified if it is by the mutual agreement of both the Managing Conservator and Possessory Conservator. Family Code § 153.007 is the Agreed Parenting Plan Statute and allows for both parties to agree on a standard possession order for the child. This statute was passed to promote amicability in settlement for child custody issues and to give flexibility to the parents if they are willing to agree on custody terms. The Agreed Parenting Plan must be in the Best Interest of the Child for the Court to approve. If the Court grants the Agreed Parenting Plan then the Managing or Possessory Conservator will have a remedy as a matter of law for any violation of the agreement committed by either party.
Finally, both Conservators may enter into a Mediated Settlement Agreement under Family Code § 153.0071. A Mediated Settlement Agreement is the only time in which the Court will NOT look at the Best Interest of the Child when granting the custody agreement.
The Mediated Settlement Agreement § 153.0071 must be:
- In bold, underlined, and capital letters that the agreement is NOT REVOCABLE
- Signed by Both Parties to the agreement
- Signed by the lawyers (if represented) of each party
The Mediated Settlement Agreement is binding and not revocable so if the Conservators wish to go this route they must understand that what is in the agreement will be held as binding. This method can be used to modify or change a standard possession order and the Court will not look at the Best Interest of the Child regarding the agreement, unless there exists a credible threat of domestic violence.
These are the methods in which a unique possession order may be obtained to accommodate irregular schedules or working hours of both the conservators. Any possession order must be correctly drafted and all future contingencies must be accounted for. An experienced lawyer must be contacted to safeguard an individual’s custody rights of their children and to make sure that a fair custody arrangement is obtained.
This is a complicated question to answer depending upon the facts of each case. If you have experienced domestic violence you need to immediately do whatever is necessary to secure you and your child’s safety. Many times a victim will go to court for a protective order and ask the judge to move the abusive or violent spouse out. In this situation contact an experienced family law attorney now!
In most cases, absent of violence or risk of abuse, we would not suggest that a spouse move out of the marital residence.
Why is this? One reason is once you have vacated the residence it may be very difficult to get back in! You have no legal obligation to leave the residence if your name is on the lease or mortgage personally and exclusivity.
Our suggestion to a client might be, to remain in the residence since the person who vacates may still have financial obligations and expenses of the family residence, while paying all expenses on a new residence for themselves. Double expenses are not a desirable result during the divorce process.
The higher wage earning spouse who moves out of the marital home must expect to continue to pay most of the household expenses, including the insurance and mortgage! What about the personal property and furnishings in the residence?
If an agreement has not been made between the divorcing couple, the moving spouse will generally only be able to leave with personal belongings (clothing & jewelry) until a court rules fairly as to temporary possession.
Secure a court order ASAP to equalize property and household expenses.
Preparing for a Texas Divorce: Assets
Going through a Divorce is painful no matter what the circumstances are. Before you get into the Texas Divorce Process, reduce expense, stress and conflict by making sure you are financially prepared. Planning ahead helps you in making sound decisions, start preparing for post-divorce life, and avoid many post-divorce pitfalls. Below is a list of items you need to gather before counseling with an attorney. Financial Documents are a must to show what your true assets and liabilities are in your marriage.
We have included many assets that you may or may not have. This is only a financial checklist of multiple assets for your review so you will not miss an important asset that needs to be reported.
1. Tax Returns (at least three years) or Tax Liens and all IRS related documents
2. Wills and Trusts with all attachments reflecting corpus and trust holdings
3. Listing of all liabilities (including mortgages, credit card debt, personal loans, automobile loans, etc.):
—Name of entity, address and telephone number
—Property securing payment (if any)
—Most current statements and account status of lenders
4. A Listing of all Real Property, address and location, including (includes time-shares and vacation properties):
–Deeds of Trust
—Notes including equity loans and second liens
—Mortgage Companies and Loan Servicers (Name, Address, Telephone Number, Account —Number, Balance of Note, Monthly Payments)
—Current fair market value
5. Motor Vehicles (including mobile homes, boats, trailers, motorcycles, recreational vehicles; exclude company owned):
—Name on title
—Fair Market Value
—Name of creditor (if any), address and telephone
—Persons listed on debt
—Balance of any loan and monthly payment
—Net Equity in vehicle
6. Cash and accounts with financial institutions (checking, savings, commercial bank accounts, credit union funds, IRA’s, CD’s, 401K’s, pension plans and any other form of retirement accounts):
—Name of institution, address and telephone number
—Amount in institution on date of marriage
—Amount in institution currently
—Names on Account
—Company loans and documents related to benefits
7. A listing of separate property (property owned prior to marriage, family heirlooms, property gifted, inherited property):
—Records that trace your separate property. These assets will remain yours if properly documented
8. Retirement & Pension Benefits:
—Exact name of plan
—Address of plan administrator
—Starting date of contributions
—Amount currently in account
—Balance of any loan against plan
9. Publicly traded stock, bonds and other securities (including securities not in a brokerage, mutual fund, or retirement account):
—Number of shares
—Type of securities
—In possession of
—Name of exchange which listed
—Pledged as collateral?
—Current market value
—If stock (date option granted, number of shares and value per share)
—Stock options plans and related documents
10. Insurance and Annuities Policies and Inventory:
—Name of insurance company
—Type of insurance (whole/term/universal)
—Amount of monthly premiums
—Date of Issue
—Cash surrender value
—Current surrender value
—Other policies and amendments
11. Closely held business interests:
—Name of business
—Type of business
—% of ownership
—Number of shares owned if applicable
–Value of shares
—Balance of accounts receivables
—Cash flow reports
—Balance of liabilities
—List of company assets
—Possible hobbies or side businesses that generate income
12. Mineral Interests (include any property in which you own the mineral estate, separate and apart from the surface estate, such as oil and gas leases; also include royalty interests, working interests, and producing and non-producing oil and gas wells:
—Name of mineral interest
—Type of interest
—County of location
—Name of producer/operator
—Current market value
—needs leases or production documents related to the asset
13. Money owed by spouse (including any expected federal or state income tax refund but not including receivables connected with any business)
14. Household furniture, furnishings and Fixtures
—purchase receipts and documents
15. Electronics and computers including software and hard drive
16. Antiques, artwork and collectibles (including works of art, paintings, tapestry, rugs, crystal, coin or stamp collections) Other large collections need to be appraised! (Guns, quilts, action figures, books)
17. Miscellaneous sporting goods and firearms
18. Jewelry including appraisals
19. Animals and livestock
20. Farming equipment
21. Club Memberships
22. Safe deposit box items
23. Burial plots including documents of ownership
24. Items in any storage facility
25. Travel Awards Benefits (including frequent flyer miles)
In Texas, Community Property Laws apply in determining the Property Distributions to a wife and husband. This system is employed to divide the property fairly between the divorcing couple.
What is Separate Property? Texas Family Law Code, FAM 3.001: A spouse’s separate property consists of:
The property owned or claimed by the spouse before marriage
The property acquired by the spouse during marriage by gift, devise, or descent
The recovery for personal injuries sustained by spouse during marriage, except any recovery for loss of earning capacity during marriage.
The terms “owned and claimed” as used in the Texas Family Code means that where the right to the property accrued before marriage the property would be separate. Inception of title occurs when a party first has a right of claim to the property by virtue of which title is finally vested. The existence or nonexistence of the marriage at the time of incipiency of the right of which title finally vests determines whether property is community or separate. Inception of title occurs when a party first has a right of claim to the property.
Under Texas Constitution, Art. XVI, Section 15, separate property is defined as all property, both real and personal, of a spouse owned or claimed before marriage, and that acquired afterward by gift, devise or descent, shall be the separate property of that spouse; and laws shall be passed more clearly defining the rights of the spouses, in relation to separate and community property; provided that persons about to marry and spouses, without the intention to defraud pre-existing creditors, may by written instrument from time to time partition between themselves all or part of their property, then existing or to be acquired, or exchange between themselves the community interest of one spouse or future spouse in any property for the community interest of the other spouse or future spouse in other community property then existing or to be acquired, whereupon the portion or interest set aside to each spouse shall be and constitute a part of the separate property and estate of such spouse or future spouse; spouses may also from time to time, by written instrument, agree between themselves that the income or property from all or part of the separate property then owned or which thereafter might be acquired by only one of them, shall be the separate property of that spouse; if one spouse makes a gift of property to the other that gift is presumed to include all income or property which might arise from that gift of property; and spouses may agree in writing that all or part of the separate property owned by either or both of them shall be the spouses’ community property.
What Is Community Property? Texas Family Law Code, FAM 3.002: Community property consists of the property, other than separate property, acquired by either spouse during the marriage.
Texas Family Code, Section 3.003 states that all property possessed by either spouse during or at the dissolution of the marriage is presumed to be community property and that the degree of proof necessary to establish that property is separate property, rather than community property, is clear and convincing evidence. Clear and convincing evidence is defined as that measure or degree of proof that will produce in the mind of the trier of fact a firm belief or conviction as to the truth of the allegations sought to be established. If property cannot be proved clearly and convincingly to be separate property, then it is deemed to be community property.
The Texas Family Code, Section 7.002, deals with quasi-community property and requires a court divide property wherever the property is situated, if 1) the property was acquired by either spouse while domiciled in another state and the property would have been community property if the spouse who acquired the property had been domiciled in Texas at the time of acquisition; or 2) property was acquired by either spouse in exchange for real or personal property and that property would have been community property if the spouse who acquired the property so exchanged had been domiciled in Texas at the time of the acquisition.
What about Property Acquired during Marriage? Property in which inception of title occurs during marriage is community property unless it is acquired in one of the following manner, in which it becomes separate property of the acquiring spouse:
By devise or descent
By a partition or exchange agreement or premarital agreement specifying that the asset is separate
As income from separate property made separate as a result of a gift, a premarital agreement or a partition and exchange agreement
In exchange for other separate property
As recovery for personal injuries sustained by the spouse during marriage, except any recovery for loss of earning capacity during marriage.
During a divorce, it is important that both parties know what type of property is involved in the divorce and what is separate and community property. This knowledge may determine or influence what each party will receive at the end of the settlement.