By: Manjula Shaw, CFP®, CDFA®
“Tips from the Trenches” is a series of articles based on conversations with professionals who interface with individuals facing or considering the prospect of divorce. Watch this space for conversations with professionals in Family & Collaborative law, Forensic-Certified Public Accountants, Mediators, Marriage Counselors, Family Court Judges, and Valuation Specialists.
Manjula Shaw is a Certified Financial Planner (CFP®), and an Asst. Vice President at Tanglewood Legacy Advisors. As a Certified Divorce Financial Analyst (CDFA®), Manjula works with individuals facing late-stage divorce. Manjula’s first conversation is with Amy Allen, a partner in the family law practice of Gray Reed who helps her clients navigate complex, emotionally charged property/family disputes. Amy shares her tips & takeaways on handling divorce from a legal perspective.
This is the first segment of the conversation:
Making the Decision to Divorce
Considering divorce can be incredibly difficult for anyone, and this decision is that much harder for someone whose marriage is decades long. It takes emotional strength and courage to confront the challenges and it is important to be educated in the legal and financial aspects before you go down the path. Knowledge could give you confidence in your ability to manage a very difficult time in your life and emerge stronger on the other side.
When You’re Not Ready to Decide: Post-Marital Agreements
Contrary to popular belief, Amy observes that most disputing couples are not ready to give up on their marriage. A possible solution? Sign a post-marital agreement to divide the assets.
Why? By Texas law, married couples must split all assets acquired during a marriage. That means any income or property that either spouse has obtained during their marriage continues to accrue until the date of divorce. The legal principle is called community property and applies to how assets and debts are divided between a couple during a divorce. Please keep in mind that some exceptions apply. A post-marital agreement prevents the financial clock from ticking while you make your final decision.
Financial Considerations: When & How to Divorce
While those contemplating divorce have likely already considered the emotional cost-benefit analysis of ending a marriage, considering the financial advantages and disadvantages of divorce is a vital step.
Financially, the more significant wage earner is better off, the sooner she files for divorce and the sooner the property division is completed. According to Amy, unless a couple has a prenuptial agreement, the longer they wait to divorce, the more the wage earner will contribute to the marital property.
However, individual situations can vary. For example, take the case of a couple who is separated, with both partners working and making equal income. One spouse maximizes his retirement savings, while the other is spending her income. According to Texas law, unless the couple obtains a temporary order, the clock is still ticking, and the wealth accumulated by the saving spouse would be considered community property. This kind of outcome could be frustrating for the saving spouse when he learns that his wife, the spendthrift, is entitled to half of his savings.
Anyone contemplating divorce should also consider the advantages of consulting with an attorney or a CDFA® versus researching on their own. The cost of that consultation may be worth it if you decide to follow through with a divorce, considering the opportunity cost of not having the right advocate in your corner.
Consulting an Attorney
Picking up the phone to call a divorce attorney is one of the most challenging and emotional decisions for many people. But you can contact a divorce attorney even though you are not ready to file for divorce. If you are seriously considering divorce, consider calling merely to gather information. A CFP®, CDFA®, or an accountant may have recommendations on whom to call.
Ask for referrals if you speak to an attorney and find the hourly rate too high. The attorney likely knows colleagues who could fit your budget and personality and associates who can support them, which will reduce the overall cost.
Stay tuned for the second segment:
PLEASE SEE IMPORTANT DISCLOSURE INFORMATION at
www.family-cfo.com/important-disclosure-information/
