Individuals in Texas who might be considering a divorce may benefit from becoming familiar with laws and financial impacts of the action. Divorce requires a division of marital property and changes tax filing status, and both those elements may be very complex.
Property division can often be the most challenging and intricate part of the divorce. Texas is a community property state, and all assets and debts obtained by the couple during the term of their marriage are considered marital property unless there is evidence indicating that an asset is individual property. Marital property is subject to division, but separate property, which might include gifts and assets owned prior to the marriage, is protected during the proceedings.
Certain assets can be difficult to divide. Some retirement accounts may benefit from using a qualified domestic relations order, which can split an account to fulfill support obligations. However, the division of IRAs are subject to state-specific laws. In addition, dividing the home can be a challenge, but some individuals choose to perform a non-taxable transfer of assets from one spouse to another, allowing for single ownership, and this value transfer may be made up with other assets during division. Couples may also choose to sell the house and share the proceeds.
Tax filing status might also change as well. If a couple is only separated when they file, they may choose to file as married filing jointly or married filing separately. However, after the divorce, both parties may be required to file as single. Other tax considerations may play a part in divorce because some fees related to tax advice may be deductible. An attorney who is familiar with divorce cases might help a person throughout property division proceedings and could help a client understand how taxes should affect negotiations.
NerdWallet, “Divorce: Making Sense of the Confusion“, J. Kevin Stophel, June 03, 2014