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TX high asset divorcePlanning for a divorce is complex no matter what kind of property you own with your spouse. To be sure, even when a couple owns relatively few assets and has a limited amount of debt that will be classified as community property under Texas law, accurately identifying and valuing property can still be complicated. Yet these processes are significantly more difficult and complex in a high asset divorce. And it is not just increased complexity surrounding the division of community property that can make a high asset divorce different. In addition to the division of community property, maintenance or alimony can also have significant implications for your taxes.

Our Texas high asset divorce lawyers want to help. The following are a few key ways that a high net worth divorce is different from other divorces.

More Money Means the Stakes Are Higher

While there is no set monetary figure to define a high asset or high net worth divorce, we typically use this term to talk about divorces in which the couple has $1 million or more in assets. Austin is a city where married couples have family roots for generations while also being a place where musicians and artists have decided to live. Accordingly, there are many married couples in and around the Austin area who might qualify for a high asset divorce. When a divorce involves millions of dollars, the stakes are simply higher.

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TX divorce lawyerWhile very few of us ever get married with the intention of later filing for divorce, Texas residents file for divorce more often than you might expect. Making plans in the event of divorce are important for Austin residents of all income levels, but planning is particularly important for wealthy Texans and high earners. We want to discuss some tips for preparing for a high net worth divorce in Austin at multiple points in time—from the time of your marriage to the moments shortly after filing for divorce. If you need assistance with your divorce, an experienced Austin high asset divorce lawyer can help.

1. Sign a Prenuptial Agreement

Under the Texas Family Code, two people who are planning to get married can enter into a prenuptial (or premarital) agreement. While prenuptial agreements are helpful for people at all income levels, they are particularly necessary for individuals who are high earners or would anticipate a high asset divorce in the event the marriage does not last. In a prenuptial agreement, the parties can reach an agreement about how certain assets will be divided or distributed in the event of divorce.

2. Avoid Commingling Separate and Community Property

Avoid commingling separate property and community property wherever possible. In other words, any property you acquired before the marriage, or any property acquired through gift or inheritance during the marriage, should be kept separate. Do not use those assets to contribute to community property, such as investing separate property into a community property account or by using separate assets to improve the marital home.

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TX divorce attorneyWhen you are going through a high asset divorce in Texas, the prospect of dividing valuable collections in your divorce can be devastating. Married couples in the Austin area often acquire many different types of collections that they consider to be priceless, from paintings and sculptures to rare vinyl records and books. Given that one of the points of the collection is to keep it intact, it can be extremely difficult to consider having a collection pieced apart and sold because you are getting divorced. The following are some important considerations for dividing a rare book collection in a high net worth divorce, including possibilities for keeping the collection intact.

Know How Property is Divided Under Texas Law

Texas is a community property state. As a community property state, any property that spouses acquire during their marriage is owned jointly by them as “community property.” Generally speaking, Texas courts will divide community property equally between the spouses recognizing that both have equal interests in the property. However, courts ultimately divide property in a manner that is equitable to both parties, or “just and right,” given their particular circumstances.

If you acquired any part of the rare book collection after the date of marriage, it will likely be classified as community property and subject to division. Exceptions may include a rare book inherited by one of the spouses during the marriage or a gift given only to one of the spouses during the marriage. Any part of the collection acquired prior to the date of marriage usually will be classified as separate property and will not be divided.

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TX high asset divorce lawyerAlthough divorce can be an emotional rollercoaster for the parties involved, proceedings can become especially contentious when there are disputes about ownership of significant, unique, or valuable assets. While prenuptial agreements can help clear up these disagreements, many couples fail to enter into these types of contracts, as they deem it unlucky to contemplate the end of a marriage before it actually begins. For help protecting your property during your divorce, please contact our experienced Texas high asset divorce legal team today.

Accounting for All Assets

One of the biggest mistakes that a divorcing couple can make is to fail to account for all of their assets, including:

  • Current bank accounts
  • Non-cash assets
  • Future interests, such as pensions, start-up stock options, and business interests
  • Inherited funds or goods
  • Income earned prior to the divorce filing, but received later, including bonuses and recent paycheck retirement contributions

Identifying all of these types of assets can be difficult, especially for those who do not play an active role in managing their household finances, so it is particularly important for those who find themselves in this position, to speak with an experienced forensic accountant before proceeding with the property division process.

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TX divorce lawyerMany people know that dividing up marital assets is one of the most difficult aspects of divorce, as appraising and determining who will retain which assets is a complicated process. However, few couples realize that one of the most complex aspects of the property division process is actually having to account for the tax implications of retaining or transferring certain types of property. To learn more about the tax-related issues that you should take into consideration during your own divorce, please contact an experienced high asset divorce attorney who can advise you.

Tax-Free Transfers

Couples who have filed for divorce and are in the middle of the property division process should remember that only property transfers that are made within one year after the dissolution of a marriage are considered income tax-free. No deductible loss or taxable gain can be declared during this time period, although once a year has passed, any transfers made by either party can be evaluated by the IRS.

Alimony Payments

Under recent changes made to the U.S. tax code, alimony payments will no longer be tax-deductible for the payer and will also no longer qualify as taxable income for the recipient. For these reasons, couples who are in the midst of a divorce should think carefully when negotiating a settlement involving alimony payments.

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TX divorce lawyerWhile investing can be an extremely profitable means of earning passive income, it can also create difficulties for couples who decide to dissolve their marriage. This is because investments entered into after a marriage takes place, whether they take the form of ownership in a business interest, or the ownership of stocks, bonds, or a retirement fund, must be accounted for and divided upon the dissolution of a marriage. This can cause a number of complications, especially for those who are not represented by an experienced high asset divorce lawyer who can take steps to ensure that the property division process goes as smoothly and quickly as possible.

Assessing Your Options

Whether a couple invests in the stock market, cryptocurrency, or real estate, they will need to address who will retain ownership of those assets before a divorce can be finalized. This can make an already difficult process much more complicated. Fortunately, there are certain options and strategies that can help couples protect themselves during the divorce process, not only emotionally, but also financially.

For instance, many couples with significant assets who decide to divorce attempt the collaborative divorce process, which can help minimize conflict through the pursuit of open and honest communication in an out-of-court setting. Collaborative divorces also help ensure that couples are able to decide the fate of their own property. Alternatively, couples could also choose to attempt mediation, or could even enter into a post-nuptial agreement regarding property division, which is a popular option for those who believe that their marriages are in trouble, but have not yet committed to divorce.

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TX divorce lawyerAlthough dissolving a marriage always has the potential to be a complicated process, high asset divorces tend to be particularly difficult to resolve. This is largely due to the fact that the property division portion of high asset divorces is often extremely complex, as couples are required to take into account the significant tax implications of any settlement agreements. For instance, some of the most notable tax liabilities for which many high net worth couples should, but often fail to account for are capital gains assessed on the sale of the family home.

An experienced high asset divorce attorney can be instrumental in helping divorcing couples identify and limit exposure to potential tax liabilities, so if you and your spouse have decided to file for divorce, it is critical to contact an experienced high asset divorce lawyer who can ensure that your financial interests are protected.

What Is the Capital Gains Tax Exemption?

One of the most important tax breaks for married couples is the capital gains tax exemption. The capital gains tax is imposed on any sales of capital investments, such as real estate. For many couples, this means that they must pay a capital gains tax when selling the family home. Fortunately, single homeowners who decide to sell their residences can exclude up to a $250,000 gain. The benefit for married couples is even higher, as couples who jointly own a home can take advantage of a capital gains tax exemption that allows them to avoid paying a tax on profits totaling $500,000.

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TX divorce lawyerThere are a number of issues that couples must address before a court will finalize their divorce, one of which is how their marital property, or the assets that were acquired during the marriage, should be divided. Under Texas law, divorcing couples must divide their marital assets in a fair and equitable way, an endeavor that is only possible if the parties have a thorough understanding of the current monetary value of the assets in question, which can vary significantly depending on the date that is chosen for valuation.

Determining an asset’s valuation date can be a difficult and often contentious process, so if you and your spouse have decided to file for divorce and own unique or valuable marital assets, it is important to contact an experienced high asset divorce lawyer who can ensure that those assets are properly appraised and divided fairly upon the finalization of your divorce.

Establishing Value

The valuation of marital assets can be established in a number of different ways, including by:

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