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TX divorce lawyerref=divided in divorce are usually homes and vehicles, but there is one other asset that can arguably be more important: insurance policies of any kind, most specifically life insurance. Insurance policies can have significant payouts and can tip the balance in terms of property and asset division.

Child Support and Life Insurance

In Texas, if you have children, it is not uncommon that a court may ask you and your spouse to maintain life insurance policies on yourselves as both a way to provide for the children in an emergency and a way to secure child support obligations. The reasoning is not to give the former spouse a payday in the event of your death, but to ensure that your children are adequately provided for. Some former spouses hesitate to do this, but it is almost always the quickest and easiest way to ensure that your children are protected. Also, it is very often the case that the obligation to maintain life insurance results in a slight reduction in child support expenses for the paying parent.

While some have legitimate concerns about money being in the hands of fiscally irresponsible ex-spouses, there is a workaround. The most common is to list your children as the beneficiary of the life insurance policy, rather than your spouse. While your spouse will still have access to the life insurance money (in theory) if it is ever paid out, they will have a fiduciary duty to ensure that the proceeds of the policy be used to benefit the children. Failure to uphold that fiduciary duty can leave them open to contempt or embezzlement charges.

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TX high asset divorce lawyerA divorce can often have a large impact on your finances. With attorney’s fees, filing fees, court costs, and the asset division process, costs can add up quickly. This is why it is so important to protect your finances during and after your divorce. Many people who are considering ending their marriage may wonder how their divorce will affect their credit score. This is especially concerning for those with high net-worth, who might be facing financial uncertainty for the first time in their lives.

Helping Your Post-Divorce Credit Rating

Having decent credit is extremely important, particularly when you are starting your new life as a single person. While getting a divorce will not automatically affect your credit score, there are ways a divorce can be detrimental to it.

Here are a few tips on protecting your credit score during and after your divorce:

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TX divorce lawyerIt is not uncommon in marriages for one spouse to handle a majority or all of the couple’s finances while the other spouse has little to no input on these matters. Family law attorneys and psychologists have a specific term to refer to the spouse who has little say in financial matters: the “out-spouse.” When you are the out-spouse, it can be fairly easy for your partner to hide assets or other property in an attempt to keep more than his or her fair share of the marital estate during divorce. Part of the divorce process is dividing your marital assets so that you and your spouse each get your fair share. To ensure your property is divided fairly, you have to have at least some idea of what your financial situation looks like, which is rarely the case if you are an out-spouse.

The Discovery Process

If you suspect your spouse is hiding assets from you, chances are he or she will not be willing to come forward and reveal those assets and financial records willingly. During your divorce, your attorney will attempt to obtain this information through what is known as the discovery process. This process is a way that your attorney can formally ask your spouse for financial records. The court can take further action in pressuring your spouse to provide the required information if he or she remains uncooperative.

The basic steps of the discovery process include:

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TX high asset divorce lawyerDuring a high net worth divorce, you will need to address a wide variety of financial issues, and the decisions you make can have a significant impact on your finances and your ability to provide for your family in the future. As you address matters related to the division of property, spousal support, and child support, you will need to be sure to understand how these issues will affect your taxes. This will help you avoid surprises related to tax debts, unexpected tax obligations, or other concerns that could affect your financial stability. Some of the tax-related concerns that you may need to address during a high asset divorce include:

  • Filing status - Once your divorce is finalized, you will no longer file taxes jointly with your spouse. However, it may be beneficial to file joint tax returns if you were still married in the year(s) before your divorce, and you may need to work with your spouse to ensure that all relevant financial issues are considered, including how you will divide any tax refunds or who will be responsible for paying taxes owed. Following your divorce, you will likely need to make a variety of adjustments when filing as a single person, and you may need to review the deductions or exemptions that you may be able to take and determine the best strategies for minimizing your tax burden.
  • Dependents and child tax credits - If you and your spouse have children, only one of you may claim them as dependents and receive any applicable tax credits. In many cases, the custodial parent will claim children, although you may be able to negotiate an arrangement that will provide you both with the maximum tax benefits. Following your divorce, you should be sure to update your tax withholding information to make sure the correct amount of taxes is being withheld from the income you earn.
  • Taxes on alimony - In the past, spousal support was tax-deductible for the payor, and it was considered taxable income for the recipient. However, this changed in 2019. A payor can no longer deduct alimony payments, and a recipient will no longer need to pay taxes on spousal support. This can result in more overall taxes being paid and lower alimony payments. However, spouses may be able to find other arrangements that are more financially beneficial for both parties, such as allowing a spouse to receive a larger portion of the marital estate instead of alimony or creating a trust that will provide ongoing payments to the recipient.
  • Property taxes - Spouses will need to consider the taxes associated with any assets they will own after the divorce, including property taxes on the marital home, vacation homes, or any other real estate property. A spouse should be sure they will have the financial resources to pay these taxes on an ongoing basis.
  • Capital gains taxes - While taxes will not apply to any assets transferred between spouses within one year after their divorce is complete, the sale of assets such as stocks or real estate during or after divorce could result in capital gains taxes. Spouses should be sure to understand what taxes will apply in these cases and who will be responsible for paying them.
  • Retirement accounts - When transferring funds in accounts such as 401(k)s or IRAs between spouses, a Qualified Domestic Relations Order (QDRO) should be used to ensure that taxes will not apply to these transfers and that a spouse will not be required to pay penalties for withdrawals made before reaching retirement age. Spouses may also need to address the tax implications of dividing pension benefits or other executive retirement benefits.
  • Business taxes - If either spouse owns a business or professional practice, they will need to determine how taxes that apply to the business will affect the decisions made during the property division process and the income that they earn on an ongoing basis. As part of the business valuation process, spouses will want to consider the taxes owed by a business, whether the business is structured as a pass-through entity, and how business losses will affect taxes owed in the future.

Contact an Austin High Asset Divorce Lawyer

The attorneys of Powers and Kerr, PLLC can make sure you have fully considered the tax implications of the decisions you make during your divorce. With our extensive experience handling complex financial issues, we can help you reach a resolution that will protect your financial interests and allow you to provide for your family’s needs. Call our Austin, TX high net worth divorce attorneys at 512-610-6199.

 

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TX high asset divorcePreparing for an imminent divorce in Texas is difficult under any circumstances. Whether you are planning to file but want to make sure you are the one who serves your spouse with papers, or you have recently been served with a divorce petition, getting ready for a divorce can be extremely stressful. High asset divorces in Texas make preparation for a divorce even more complicated given the value and complexity of many assets that will be classified as community property under Texas law. When an Austin high net worth divorce is imminent, you should begin taking steps to ensure that you have the best chance of reaching a divorce resolution that is right for you. The following are tips for preparing for an imminent high asset divorce. If you have additional questions or need assistance, you should reach out to an experienced Texas high net worth divorce lawyer as soon as possible for legal advice.

Find an Attorney with Experience Handling High Net Worth Divorces in Texas

It is incredibly important to have a lawyer with experience representing Texas clients in high asset divorce cases. While you might think that any well-reviewed divorce attorney can handle your case, it is in your best interest to hire a high asset divorce lawyer who knows how to effectively represent clients in your position. High net worth divorces can have a variety of complex and contentious issues, and you will want to have an advocate on your side who knows what to do.

Learn About Appraisers and How They Can Help with Asset Valuation

Now is the time to begin learning about appraisers and how an appraiser can help you to obtain fair valuations for assets that will likely be classified as community property. You should not rely on your spouse to hire an appraiser. To be sure, you will want to work with an appraiser who is clearly a neutral party and will not give a biased valuation of certain tangible property.

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