How assets will be divided and your finances handled are not always the first thing that people think of when divorcing. Many family law clients are so wrapped up in their emotions when deciding to divorce that they have not thought about their financial planning in a divorce and what they are entitled to in an Austin divorce.
Others did not handle the finances during the marriage and have very little idea of what the community estate is worth or how to handle money. Whatever your knowledge level, your financial health should be a primary consideration when making decisions during your divorce. Here are some tips:
When assessing your community estate and before you make any financial decisions, be realistic about what your financial skills are and what your financial risk level is. Ask yourself whether you are able to handle your finances, if you incurred debt during the marriage, and whether you are able to come up with a solid financial plan for your future. Additionally, think about whether you are a conservative, moderate or higher risk investor. This will, in turn, help you to decide what kind of help you need during settlement negotiations or trial and what assets you would want in a divorce. For example, if having a stable home and cash is important to you, you may be willing to trade stock and a business with a potentially higher rate of return for the more conservative investments such as residential real estate and a retirement account.
Before you enter into any settlement agreement or make any financial decisions, other than the ordinary necessities of life, make sure that you have a comprehensive understanding of the community estate. That includes any debts, the value of each asset, their rate of appreciation, taxes, cash flow, the reasonable rate of return for each asset, and whether your financial plans need to change based upon the divorce or a change in market conditions. It is not uncommon in a divorce that one spouse is not completely candid with the other about investments, accounts or assets. If this is the case, you may need to conduct discovery to uncover any hidden assets in which you may have an interest.
Your separate property assets and your spouse’s separate property assets should be taken into consideration. If you have received a gift or inheritance or your spouse has, those assets could affect your decisions as to how the community estate is divided. This should include the tax considerations, the frequency of the receipt of those monies, and their value and duration.
Think about what income you will need to live on and what your anticipated income needs are for your financial future. This includes revenue streams from investments or gifts, any support you receive, your living expenses, your debts, your job if you have one, and any other sources of income that you have or expect to have. Spouses frequently have to reduce their lifestyles after a divorce and you should be prepared for that. Part of your decision will depend on the marital lifestyle, the community assets, and what both parties can afford to maintain. Part of your financial divorce planning will also depend on your age, health, ability to earn and invest, and financial goals.
Depending on your age and financial goals, at some point your retirement will become a consideration. If you are relatively young when you divorce, you probably have decades ahead of you to earn a living and to plan for retirement. If you are in mid or later-life, your retirement may be more imminent as will a decline in your earning ability. When deciding to divorce, think about your retirement and what kind of financial life that you want to have before making any final decisions about dividing assets.
Generally speaking, both parties have a duty to become self-supporting after a divorce. Factors to consider are the parties’ age, health, marketable job skills, time out of the work force, tax considerations, and their relative earning capacities. Think realistically about your job skills and earning capacity. If you have been working continuously during the marriage, for example, chances are that you would continue in your same profession after the divorce. Conversely, if you took time off during the marriage to raise children or because your spouse was a high earner, you may have to think about what your job skills are, whether you need to be retrained, and what you are capable of earning. Vocational evaluators and job coaches can be helpful in assessing your job skills if you need assistance in determining what you are skilled at and how you can become reasonably self-supporting.
Not everyone can handle their finances on their own or feels comfortable doing so. Many people rely on the professional guidance of accountants, financial investors, trustees, or other financial professionals. Be realistic about whether you need such guidance and seek professional advice if you might need help planning your financial future and handling your assets after an Austin divorce.