The longer you and your spouse were together in marriage, the more complex and challenging property division proceedings might be if you decide to part ways. Texas is a community property state (one of only nine in the country), which means a judge will split marital property 50/50 between the two of you. To ensure that you receive a fair divorce settlement, you’ll want to prepare by reviewing your assets so that you have a clear idea of their value.
Most people have an idea of the value of major assets, such as their home or a car. However, if you’re filing for divorce, there are many other issues to consider that may affect your settlement. If you are not particularly knowledgeable about finances or property division laws in Texas, you’ll want to seek experienced guidance before heading to court.
Retirement accounts in a high-asset divorce
All retirement accounts are not the same. It’s imperative to know whether you (or your spouse) have a traditional account or Roth account. There might be an equal amount of money in a Roth account and a traditional account. Typically, however, the assets in a Roth account are worth more due to the tax-free benefits of such accounts.
As you prepare for property division proceedings in a Texas divorce, it’s a good idea to carefully review any retirement accounts that are relevant to your case. Keep in mind that, if you are a certain age, you can withdrawal from a Roth account penalty free and tax free. You’ll also want to know if you need a qualified domestic relations order (QDRO) to split a 401(k) or pension plan in your divorce.
Investments, health insurance and other issues
The value of the assets of a taxable investment account depends on the amount you retain after taxes. There may be several options for splitting taxable investment assets in your divorce. It may be possible to sell the assets and split the proceeds with your ex. If you determine that doing so would create too heavy of a tax burden, you might choose to simply split the holdings in the account, instead.
You’ll want to ask whether a specific account has the potential to grow or to generate income, as well as whether you’re able to tolerate the risk associated with the investment. Remember that, if you sell the asset, you must pay capital gains tax on the amount over cost, meaning, if your investment has appreciated, you must pay tax on proceeds you receive that exceed your initial investment cost. Other issues, such as health insurance, Social Security benefits and more may be relevant to your divorce.
Make informed decisions
The biggest mistake you can make in a high-asset Texas divorce is to walk into court not knowing what you’re entitled to in a settlement. The goal is to make informed decisions and to have a basic understanding of community property division guidelines, which you can achieve by seeking experienced legal support before heading to court.