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Pros and cons of a strategic divorce

Some couples in Texas might wonder whether they would benefit from what is sometimes called a "strategic divorce." In a strategic divorce, a couple splits on paper in order to save on taxes or to help one spouse qualify for Medicaid. A divorce could also mean that there is more financial aid available for a child's college education. However, there are a number of potential drawbacks.

In many marriages, both spouses are insured through one spouse's health insurance benefits. A divorce could mean having to pay thousands of dollars in insurance premiums. A spouse who does not work outside the home would also lose the ability to get retirement contributions in an IRA. Furthermore, while a spouse must sign a waiver to allow someone else to be named the beneficiary on a 401(k), after a divorce, this is no longer necessary. Even in an amicable arrangement, there might still be a danger that after a major conflict, the ex-spouse could be removed as beneficiary. The couple might also be required to split a retirement account using a document called a qualified domestic relations order.

One spouse's business could also be vulnerable in a divorce. The other spouse may be entitled to own some voting shares in the business, and this could create conflict.

People who are considering divorce for any reason might want to discuss the financial ramifications with an attorney. In Texas, a community property state, joint property is supposed to be divided equally. However, there is usually still flexibility for a couple to reach an agreement on property division that suits their situation instead of going to court. People may want to think about what kind of arrangement would leave them finally secure since a divorce often means a drop in a person's standard of living.

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