Financial Planning in a Texas divorce: What not to do

When it comes to getting a divorce there can be so much on your mind at one time that it can seem overwhelming to focus on any one area. Fortunately, that is where hiring an experienced family law attorney can help you and your family. For example, the attorneys with the Law Office of Bryan Fagan focus our law practice on family law and helping families just like yours. We have the expertise and ability to advocate for you inside the courtroom and at the negotiating table. It is simple to get a hold of us, as well. Just call us on the phone or message us through our website. We offer free of charge consultations with our family law attorneys six days a week at our three Houston area locations, over the phone and via video. 

Financial problems are not uncommon for families who are going through a divorce. Some people will tell you that financial problems are the leading cause of divorce in families. While this is not something that our attorneys keep track of I can confirm that in many families who go through divorce financial problems are at the forefront of the issues facing them. While you may not be at the stage where financial discussions can save a marriage you can position yourself to avoid additional problems when it comes to your finances in the divorce by learning about how financial assets are divided. By gaining this information you can avoid problems and mistakes that can lead to a more expensive and less favorable outcome in your divorce case.

Before we go any further, I wanted to say something tell me when reading this blog post who is skeptical about whether Community property division is important to people, we don’t have much in the way of assets or property. This is something I’ve personally heard many times from people who come into our law practice for a free-of-charge consultation. The thinking goes that because a person he’s not wealthy that they do not need to focus their attention on the divorce or dividing up assets or debts. These folks figure that because they do not make much money or have much in the way of assets they can simply breeze through a divorce without much concern.

I would recommend that you not take this attitude when it comes to your divorce. No matter where you are on the income or wealth spectrum it is worth paying attention to important subjects like this as you begin a divorce. At least learning about how the process works and what is at stake should be the minimum number of goals that you have at this stage of the case. Do not underestimate the complexity of even a simple divorce. You may be relatively young or have been married to your spouse for a relatively short amount of time. However, there are likely some aspects of your case that require some introspection and consideration regarding how you want to see your property divided.

More than that, if you are just beginning your divorce then you should try to learn about mistakes that other people have made in order so you can avoid committing the same errors. There is no better source for this kind of information than an experienced family law attorney with the Law Office of Bryan Fagan. We have walked alongside thousands of southeast Texans as they have gone through their divorces. This has allowed us to have a front-row seat to learn how people from all walks of life approach to divorce. Additionally, it is allowed us to learn a great deal about how divorce cases work and how we can be a force for good on behalf of our clients and their families.

In today’s blog post I want to focus on the subject matter that can help you with the financial parts of a divorce. Not help you tomorrow, or next year- I want this information to be able to help you right now. There’s an old saying: the best time to plant a tree was yesterday- the second-best time is today. The perspective and information that we give in today’s blog post are going to be helpful to you in an immediate sense. Maybe you won’t be able to implement all these steps immediately but some you will. Take all of this information and ask yourself what steps you can take today to improve the status of your case. If you have questions about anything that you have read, please call us at our office to set up a free-of-charge consultation. 

Dividing property- what not to do

Texas is a community property state. That means that all property in existence that is owned between you and your spouse at the time of your divorce is presumed to be community property and thus would be eligible for division in your divorce. That presumption can be rebutted due to there being a classification of property known as separate property. Separate property is any property owned by you or your spouse before your marriage or acquired by either of you during the marriage by gift or inheritance. 

We won’t get too much into the details of community property law in Texas, but it is important to know these basics before talking about how property can be divided in your case. The more property that you or your spouse own the more complex the property division tends to be. This is true not only from a financial perspective but also from an emotional and relational perspective. Certain types of property- like a family home, for example- tend to carry with it a certain degree of emotional baggage. 

Then there is the financially and logistically complex nature of dividing property aside from any emotional issues. One example of the complex types of property division involves retirement benefits like pension plans, deferred compensation plans, IRAs, and 401Ks. Retirement planning is about the driest subject in the world when it comes to divorce but it is nonetheless important. This is especially true if you are a person who is nearing retirement or is in your Golden Years. Being able to work through these subjects in your divorce will determine in large part your level of success. 

A mistake that people make in your shoes is to only consider the current dollar value of the assets and then decide about how to divide the property in that way. Property tends to increase or decrease in value- it very rarely stays static. As a result, if you estimate the value of a piece of property at the beginning of a divorce but do not look at it again then you will be negotiating on outdated information. This can certainly impact in a negative sense how you perform in the divorce

Separate property will remain separate property unless you commingle assets with community property. For example, let’s think about a separate property bank account that you owned before your marriage. Once you got married, rather than keeping the funds in that account separate from your marital property, you and your spouse would contribute community property income into the account. As a result, the separate funds would then be commingled and can lose their eligibility to qualify as community property. 

Another potential issue to be aware of when it comes to separate property is if you own a separate property home then you may get yourself into a position where reimbursement of your community estate would occur if community funds were utilized to make improvements on the home, repairs or even pay the mortgage. For instance, if you owned a home before your marriage and continue to do so after you got married then you would need to be careful about how you contributed to that home in terms of income. Using the house as a rental home can make good financial sense in the short term but if you’re using community funds to pay the mortgage or make improvements on the home then you may end up owing the community state money out of your separatist state when it comes time for a divorce.

Another common experience of working with many people who have gone through divorce cases is that mothers and fathers alike can get themselves into financial trouble when they attempt to remain in a family home that is beyond their abilities from an income standpoint. If you want to stay in the family house to create a sense of stability and consistency for your children and this is indeed a noble goal. However, that noble goal should not be looked at as being more important than the financial stability of your family. You can easily get in over your head when it comes to the finances that remaining in a house that you cannot afford. This subject is so important we should take some time to talk about it specifically here in this blog post.

Consider the pros and cons of remaining in the family house after a divorce

The ramifications of remaining in your family home after the bourse are so significant but they can impact your family both now and in the future for many years. I fully understand that a family home is a place that carries with it many memories, both good and bad, and that will influence whether you want to try to keep the house or whether you are OK with selling it or allowing your spouse to remain in it. Your children likely have opinions on the subject depending on their age and you may want to do whatever is necessary to appease them during a time when you feel like you are harming them in some way due to the divorce

However, now is a time for you to consider whether you have the financial wherewithal to remain in the family house and to pay the bills associated with doing so. You are not a bad parent if you want 2 get out from underneath the house or not choose to remain in the family house after a divorce. This may be the most sensible thing to do. Also, even if you don’t have children, you may have a desire to stay in the family house for no other reason than to increase the stability and consistency in your own life. Whether or not you have children you should consider that there are significant financial expenditures that will be necessary for you to consider in the immediate sense when it comes to staying in the family house.

To begin with, the odds are good that there is a mortgage on the home. As such, you may be required to at least attempt to refinance the mortgage as a part of your final decree of divorce. I say attempt to refinance the mortgage because there is no way to guarantee that you will be approved for a refinance. With interest rates more than twice what they were at the same point in time last year compared to this year, very few people are excited about refinancing a mortgage at this period however, that may be a requirement, but she negotiate for in your divorce settlement to have your spouse’s name removed from the loan.

As a part of that refinance, you may need to pay a certain sum of money upfront for the application or to follow through with the refinance being approved. Do you have enough money set aside to be able to pay for this refinance and Add all the costs associated with it? This is something for you two specifically plan for and not assume that you can pay these fees. If you have not planned in this regard, then you should seriously consider your options as far as not remaining in the house. 

Next, you should consider what it means to your family if you do not remain in the house. Specifically, there is nothing wrong with admitting to yourself that you do not have the money or resources available to you to remain in the family house. Remember that mortgage payment our based on the income of you and your spouse combined. Only having one income likely reduces your income by 1/2. The mortgage lender may not have even allowed you to take out a mortgage on the House based on your income and assets. This is a good sign that taking any equity from the sale of the home and moving forward with your life would not be a bad idea.

Any stability and consistency that you can provide your children with as a result of remaining in the family house could be outdone by the stress and anxiety brought about by trying to pay for a house that you cannot afford. To be sure, you should map out a budget for yourself that would allow you to look into the future and determine whether you can afford to stay in the house. Not only do you have the mortgage to concern yourself with but also property taxes, day-to-day repairs, long-term maintenance, and utilities. Having an emergency fund for yourself is a wise idea but that can only take you so far when you live in a house that requires you to put more money into it than you have in reserve.

Another subject that I think is important when it comes to wanting to stay in the family house is that if you choose to remain in the family house you may forgo other assets that would allow you to have more liquid cash available to you sooner rather than later. Having money tied up in a family house is OK if you do not need the money in an immediate sense. However, most people coming out of a divorce would have some use for cash and disposable income like that. You should consider your needs after a divorce and determine whether or not it would be more advantageous for you to either sell the house warning goes, she ate for assets that allow you to be in a better cash position during a period of transition after your divorce comes to an end.

No two divorces are the same. As a result, you can be sure that some of the information contained in today’s blog post will not be related specifically. Additionally, some of what you are going through may not be contained in this blog post. As a result, contacting the attorneys with our office to go over your specific circumstances and have your questions answered would be a smart decision on your part if you have questions or concerns about anything you read today. 

Questions about the material contained in today’s blog post? Contact the Law Office of Bryan Fagan 

If you have any questions about the material contained in today’s blog post, please do not hesitate to contact the Law Office of Bryan Fagan. Our licensed family law attorneys offer free of charge consultations six days a week in person, over the phone, and via video. These consultations are a great rate for you to learn more about the world of Texas family law as well as about how your family circumstances may be impacted by the filing of a divorce or child custody case.

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At the Law Office of Bryan Fagan, PLLC, the firm wants to get to know your case before they commit to work with you. They offer all potential clients a no-obligation, free consultation where you can discuss your case under the client-attorney privilege. This means that everything you say will be kept private and the firm will respectfully advise you at no charge. You can learn more about Texas divorce law and get a good idea of how you want to proceed with your case.

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