Q: When am I responsible for my spouse’s debts when I had nothing to do with the charges? A: Debts from before marriage are a person’s separate debt and you wouldn’t be liable; however, if the debt was incurred during the marriage in order to provide necessities like clothing, food, etc. then you too are liable. See the article written by Ron Lipman (Houston attorney), link follows: “Til Debts Do Them Part”.
Q: Is my IRA community property since it is in my name only? A: Everything purchased during the marriage, even in another state, no matter whose name it’s in, is typically considered marital property. In Texas, the income from separate property is also considered a marital asset. It is important to evaluate the disadvantages to having your IRA included in the list of assets you retain following your divorce. The funds are not accessible before age 59-1/2 unless a 10% penalty plus ordinary income tax is paid. The tax liability should be considered in the long-range analysis.
Q: What is “Separate Property” in Texas? A: Separate property is what is brought into the marriage, what is inherited during the marriage, or received during the marriage. So long as it is not mingled with the community property, it maintains its separate property status during divorce.
Q: What is “Community Property” in Texas? A: Community property is all the property acquired during marriage, no matter whose name it is in and in which state it was purchased. In Texas, the income from separate property is also considered community property although the appreciation in value of the underlying asset remains separate. For IRAs and qualified plans the rules are different. The appreciation on IRAs and qualified plans remains community property.
Q: Will I be able to receive maintenance payments? A: Court-ordered support is limited in Texas; however you may be able to negotiate contractual alimony exceeding Texas guidelines. Be sure to review the changes in Texas alimony laws. You will have to illustrate a projected post-divorce budget that demonstrates your monetary needs. The divorce financial analyst can assist in the preparation of this budget. Often the higher earning spouse receives more assets as an offset in exchange for providing alimony.
Q: Do I have to split my pension? A: The portion of your pension which was earned before your marriage is not subject to division; however, the portion accrued during your marriage is community property in the state of Texas. It may be possible to keep the pension undivided by having its value offset with other assets. Division of the pension can be accomplished with a Qualified Domestic Relations Order (see further explanation below). Your Certified Divorce Financial Analyst can value the pension, if no value is provided by the company.
Q: If I have custody of the children, should I keep the house? A: While this question cannot be answered affirmatively in every case, we realize that there is an emotional attachment to the home. It’s important to analyze what it will cost to maintain the home, including maintenance, utilities and mortgage payments. The next step is to ensure that there that there are funds to pay the necessary bills each month. Retaining the home must be compared to the advisability of giving up other assets that may provide income or future appreciation such as investments. Additionally, the cost of alternative housing must be considered, whether renting or acquiring a less expensive home. Read more aboput the issue of buying a house during divorce here. A Certified Divorce Financial Analyst can help to answer this question before committing to a settlement that cannot be changed.
Q: What is a Qualified Domestic Relations order and is it necessary? A: A Qualified Domestic Relations Order (QDRO – (Pronounced quad ‘ ro)) is the legal document that divides a pension or 401K in a divorce. The divorce decree does not serve to divide these accounts. There are many factors that go into QDROs which can require qualified advice from a specialist in this area.
Q: Do we have to go to court? A: If you are unable to reach a settlement, you will both be required to attend court with your attorneys. If a settlement is reached, only the spouse who files for the divorce must attend the hearing.
Q: Should you buy a house before the divorce is final? A: Some of us don’t have an option of buying a home during the process of divorce. Financial constraints prevent them from doing so. But, for the fortunate few who have the resources and can afford the down payment, the payments, property taxes and upkeep, careful thought should be given to the decision.
Texas considers all property purchased during the marriage (even during the pendency of the divorce) to be community property. It doesn’t matter whose name is on the title or account. The other spouse still has an interest in the home and the title may not be a clear one. Title companies require the other spouse to attend the closing and basically give permission for the home to be purchased.
During the divorce process, “temporary orders” are normally in place to prevent the spouses from spending down assets or incurring new debts. They are typically required to spend only what is absolutely necessary to sustain their individual households. Often, a limit of $500 is placed on discretionary spending. Above that amount requires approval of the other spouse.
If the husband is approved for a loan on a new home based on his previous income and current expenses, this wouldn’t include his future child support or alimony obligations. Would he still qualify if the lender was aware of these pending obligations? In Texas, he is usually obligated to pay 20% of his after tax income for one child, 25% for two, and 30% for three children (limited to $90,000 of income).
Many attorneys require the non-purchasing spouse to sign a special agreement to permit the purchase of the home. However, this agreement still doesn’t clear the title. This agreement still doesn’t address his ability to make the mortgage payments once the divorce is finalized and his support obligations are known.
Yes, it is possible to purchase a home while going through the divorce process, but it is ill-advised and problematic. Before doing so, we recommend consulting your attorney in order to address the situation in a legal and logical manner.
Q: Should we divide everything 50/50? A: The State of Texas requires a “just and equitable” division of property. This can take into account the need for one spouse to receive sufficient assets to provide support considering the much higher earnings of the other party. A 50/50 settlement is rarely appropriate and should never be implemented without the advice of an attorney, and ideally, using an analysis of the situation by a Certified Divorce Financial Analyst.
Q: Do I need an attorney? A: An attorney may be used as a consultant incurring an hourly charge. This allows the divorcing individuals to gather financial data, enlist the services of a divorce financial analyst and arrive at a settlement through a mediator. An attorney is not required to be involved in all aspects of the case. For an attorney to handle all issues of the divorce is very, very expensive. And frequently, the attorney actually instigates a battle in order to keep fees coming in. See the article entitled “When to Keep Attorneys Out of Divorce & When You Need One”.
Q: What is a collaborative divorce attorney and when should I use their services? A: Collaborative attorneys are trained to negotiate a divorce settlement without the use of litigation. The divorce proceeds through a series of meetings between both attorneys, both parties, and sometimes a financial expert and a mental health professional. The first four-hour meeting may only deal with the collaborative agreement and its rules. Arranging the meetings can be extremely difficult with two attorneys involved. Communications by email and phone among all parties is also part of collaborative method. No “discovery” is used, depending on both parties to be open and honest about assets to be divided. No “orders” are permitted, causing some to worry about squandering of assets when a restraining order isn’t in place. Both attorneys and the financial planner are required to resign if an amicable agreement between the parties cannot be reached. New attorneys must be retained.
Q: How do I know which assets are the best to keep? A: Not all assets are created equal. Some assets may have a more positive effect on your financial future. Retirement accounts and other financial assets usually continue to appreciate in value and provide income for retirement. Certain assets require more financial outlay for maintenance, such as a home and automobile. Capital gains should be calculated on invested assets and real estate, with an adjustment made to the division of assets.
Q: I have never worked. Can I still get Social Security? A: If you have been married for 10 years or more, then you are entitled to one-half of your spouse’s Social Security, even if you are divorced. Your spouse still retains his full Social Security benefit. This is determined by federal law and is not a negotiation issue in divorce.
Q: When should I employ the services of a Certified Divorce Financial Analyst (CDFA)? A: The Certified Divorce Financial Analyst should be contacted when you first consider a divorce. However, the CDFA can provide a valuable service any time prior to a finalized settlement by assuring that a proposed settlement will work for you. Waiting too long may limit your options and result in a less desirable outcome, although the CDFA’s services will still provide value in providing a presentation for the court or attorney.
Q: Are there different ways to get divorced in Texas? A: All methods of divorcing result in the divorce agreement and the court decree. However, the methods of getting to these documents can vary drastically. There is no rule that an attorney must control every facet of a divorce. The following chart will best answer this question: Ways to get Divorced. Also, read our brief description about divorce alternatives in Texas.