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League City Family Law Blog

When to assume a mortgage in a divorce

When Texas couples get a divorce, one of the parties may decide to keep the family home. There are essentially three ways the couple can do this. One is for the couple to keep the joint mortgage even though only one spouse keeps the home. The drawback is that if the spouse who keeps the home misses a payment, it could seriously damage the other spouse's credit rating.

The other choices are to refinance the loan or assume the mortgage. A mortgage assumption can look like an attractive option because it allows the person to keep the favorable terms of the original mortgage. Not every loan can be assumed, so the first step for the person should be to get a copy of the promissory note and check it for that detail.

Taxation issues for families during a divorce

Tax season may raise some questions for Texans going through a divorce, especially parents of dependent children. Claiming a child as a dependent on a tax return can offer significant financial benefits. However, only one person can claim each child as a dependent at any given time. When parents do not reach an agreement among themselves about how to handle taxation, the results can be complex and challenging.

Claiming a child as a dependent is perhaps more financially important than ever. The claiming parent can file with Head of Household status and access several valuable tax credits, including the Child Tax Credit, Child and Dependent Care Tax Credit and Earned Income Tax Credit. All of these credits vary in amount depending on the number of dependents claimed. While the Tax Cuts and Jobs Act removed many personal deductions from income taxes moving forward, these credits remained important. Indeed, the Child Tax Credit doubled under the new tax law.

What may happen to a business in a divorce

Business owners in Texas can protect company assets in case of divorce with a prenuptial agreement. However, it can be difficult for spouses to talk about prenups and the possibility of divorce. Therefore, another option is to address divorce-related issues in the company's organizing documents. These documents may be written to grant a cash award for a spouse in lieu of actually dividing the business.

The purpose is not to try to cheat a spouse out of their share of marital property but to establish parameters to make a divorce, if it happens, less contentious. For example, while a prenup might specify that the company is separate property, it could also name a percentage of the company's value that a spouse can claim. These types of documents are just as important if the couple runs the business together. One could buy the other out in a divorce; although, some couples may agree to keep running the company.

Making the divorce process more civil

Divorce is an arduous process that can bring out the worst in people. During a divorce, people who loved each other once can sometimes act as if they are bitter enemies, trying to hurt the other person at every turn. As a result, it is important for people going through divorce to make the process be as amicable as possible.

To begin with, couples trying to imagine what kind of problems could show up during the divorce can look at the history of their marriage for guidance. They should try to answer questions such as how they resolved their conflicts and how each person handles hostile scenarios.

How parents can create a workable custody schedule

One step that is necessary for parents in Texas who are getting a divorce is making a schedule for custody and visitation. It is important for parents to keep in mind that the purpose of this schedule is for the child to maintain the relationship to each of them and that this could mean they are sometimes inconvenienced.

Parents should not look on the schedule as a way to punish the other parent. They should also avoid trying to keep score and should not assume that just because the other parent has a different approach to parenting, that approach is wrong. The parenting schedule should be based on whatever the current situation is and not on what the parents hope may happen in a few years. For example, the schedule should not be created with the assumption that in a few years, one parent will move closer.

Financial reasons couples may want to reconsider divorce plans

Even with stats showing that about half of all marriages eventually come to an end, most couples walking down the aisle in Texas have visions of a lifetime together. Still, there are times when some life partners begin to explore the possibility of permanently separating. While there are certainly valid reasons for ending a marriage, there are also some equally valid financial reasons why couples may want to give divorce a second thought.

First of all, there are the professional costs associated with getting a divorce. In addition to legal fees, such expenses may include costs to hire real estate agents, financial planners and other ancillary professionals. Some ex-spouses also seek help from therapists to deal with the emotional toll of ending a marriage.

Retirement account division needs extra attention during divorce

When a Texas couple decides to end their marriage, they will have to split their retirement accounts as part of the divorce settlement. The splitting spouses should give careful attention to the details involved in the division and distribution of retirement accounts such as 401(k) plans, pensions and IRAs. Mistakes could result in unexpected tax bills or an ex-spouse receiving an unintended amount of money.

Workplace retirement accounts require the preparation of a qualified domestic relations order during a divorce. This court order will describe who gets how much and whether the funds will be directed to another retirement account or distributed immediately as cash. In many cases, cash distributions will result in income taxes and penalties for the recipient. People splitting IRAs or Roth IRAs do not need to execute a QDRO, but they still should obtain advice about possible taxes.

Splitting credit card debt during a divorce

Saying goodbye to an ex in Texas doesn't mean credit card debt automatically disappears. In fact, credit card companies typically have a legal right to make efforts to collect debt owed by both spouses following a divorce. This is why it's widely recommended that newly divorced individuals make an effort to leave a marriage free of debt obligations. Plus, having lingering marital debt opens an ex up to the possibility of attempts by creditors to obtain what's owed should a former spouse file for bankruptcy or fail to make scheduled payments.

Credit card debt incurred prior to a divorce is usually the responsibility of both parties as long as they were both co-signers. However, if the other spouse was only a joint cardholder but not a co-signer, they are normally not responsible for the debt. One possible exception is in states - like Texas - where community property laws apply. After separation, any further debt incurred on cards is the responsibility of the individual making the charges. Since the date of legal separation varies by state, soon-to-be-divorced spouses are encouraged to keep accurate records of credit card activity.

Co-parenting post-divorce vs. parallel parenting

Most parents untying the knot in Texas are likely to have some type of arrangement that allows both parents to spend time with the children. There are times when concerns about a child's safety and well-being warrant sole custody. However, courts often prefer to keep children involved in both parents' lives post-divorce whenever possible.

Decisions made involving a joint child custody agreement are typically based, in part, on former spouses' ability to co-parent effectively. Essentially, this means parents are able to put aside lingering bitterness and animosity so they can both be involved in their child's life. Another approach to co-parenting is what's termed "parallel parenting," which is basically an arrangement where parents remain engaged with their children but disengaged with one another.

Why some parents choose nesting after divorce

Parents in Texas who are going through a divorce and choose what is sometimes called "birdnesting" or "nesting" as a child custody arrangement might wonder how long they should keep the schedule in place. Nesting refers to when the children live full time in the family home while their parents take turns staying with them there. The rest of the time, parents live elsewhere, usually in a shared apartment. Most experts say this setup should not last more than three to six months.

Nesting can be a good way to offer children stability as they adjust to their parents' divorce. However, as it goes on, they might start to think the arrangement means a reconciliation is likely. Sharing homes can also be difficult for parents even if the divorce is relatively amicable and could start to create conflict.