By Patricia Barrett, CFP CDFA Mediator
Dealing with the Spouse
It is especially important to be business-like with the spouse, since emotions can interfere with negotiations. Don’t let old battles rekindle. Refuse to continue a meeting that degenerates into a battle.
While you want to be clear about what is important to you, try not to make your demands excessive.
Never use your children as a pawn to hurt the spouse or draw them into the litigation process. The children will suffer unnecessarily.
Spousal Support (Maintenance) in Texas
Texas passed a law granting support in 1995, although the guidelines are limited allowing no more than $2500 per month or 20% of the wage earner’s monthly gross income for a maximum of three years. This is available if you were married at least ten years and will not have sufficient property after the divorce for living expenses. You are also eligible for maintenance if you have a medical or psychological condition that prevents you from working or if the husband was convicted of spousal abuse during the preceding two years.
It is possible, however, to reach an agreement with your spouse to provide a certain amount of support for a greater number of years or greater amount than provided in the Texas statutes. This agreement becomes part of the divorce decree.
Child Support
Texas has child support guidelines used by courts and, while not mandatory, are considered to be in the child’s best interests. Courts will, however, consider reasonable variations if agreed to by both parties.
The guidelines provide for a percentage of “monthly net resources” to be paid in child support, with an increased percentage for additional children. The monthly net resources include all sources of income after taxes calculated for a single individual with one exemption. The percentages of monthly net resources based on number of children are:
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1
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2
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3
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4
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5 or more
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20%
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25%
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30%
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35%
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40%
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These percentages apply to the first $6,000 of monthly net resources. The court can order additional support based upon proven needs of the child if the spouse earns in excess of this amount. An additional sum may be added to cover the cost of health insurance for the child or children.
The court will want to see worksheets outlining income and expenses for both spouses. These are called Financial Information Statements.
All child support is subject to an “order for income withholding” deducting child support from the parent’s paycheck.
Debts During Separation
Separation from your spouse doesn’t relieve you of liability for any debts incurred during this time. You can cancel joint accounts and write letters to the creditors notifying them of the pending divorce and that you are no longer liable for the account. However, should the husband fail to make payments, the creditor can still attempt to collect from you. Your credit rating could be negatively affected.
One solution is for both parties to cancel the joint accounts, transferring a share of the balance to new credit cards in each person’s name.
Tax Issues
In dividing marital assets, the after-tax value of each asset should be considered before the final settlement is reached. IRAs, 401ks and pension payments are taxable at ordinary income tax rates as payments are received. These assets should be valued at an after-tax amount for purposes of equitable settlement.
Additionally, real estate, stocks or bonds may have capital gains liability that should be estimated and taken into consideration. The homestead, however, has a $250,000 per person exclusion from capital gains. If the home is sold before the divorce is final or a provision is made in the decree, a total of $500,000 is available in exclusion from capital gains. Few people exceed this amount.
Generally, the wife should keep the home since children need continuity, although this may not be financially practical. Continued joint ownership of the residence with the ex-spouse is not advised, since this creates grounds for disagreements and problems in the future. However, a clause in the divorce decree can provide for the sale of the home following the youngest child’s 18th birthday, with the ex-spouse receiving one-half of the net equity.
A divorce financial analyst can crunch the numbers for you to be sure you are financially able to continue ownership of the home. Sometimes the payments can deplete available resources within a few years.
