Couples who are ending their marriages need to think clearly about their finances even if they are going through a highly emotional divorce. There are a variety of things to consider that can be an important part of many divorce settlement agreements.
At the outset, the income tax filing status of the parties will change. While a couple can still file a joint return after they separate, this will no longer be possible once the divorce is final. It is also important to consider the tax implication of property that is divided in the divorce as well as any retirement assets that are divided during the proceedings. Generally, a couple will shift marital assets whenever possible from the person who has the higher tax rate to the person with the lower tax rate as it may help both sides save money on capital gains and other taxes.
Texas is a community property jurisdiction, and courts will divide the marital assets equally between the spouses unless they have previously agreed upon a property settlement. In most cases, gifts made to one spouse as well as any inheritances received during the marriage will be considered separate property and thus not subject to division by the court.
While divorce can be a difficult situation for anyone, it is important to think about the financial impact of such a decision. Talking to an attorney may make it easier for a client going through the process negotiate a comprehensive settlement agreement that takes into account both the future income tax implications of the property division as well as the future needs of each party.
Source: NerdWallet , “Divorce: Making Sense of the Confusion“, J. Kevin Stophel, June 03, 2014