You’ve just been served divorce papers. Now is not the time to fall to pieces. You may be surprised or perhaps you anticipated that marriage was failing. Like any traumatic event in your life fear kicks in. You can grieve later but now it is critical to jump into action as if saving your own life.
The time between being served divorce papers and the official termination of the marriage varies. There are several variations depending on how you elect to get divorced. The State of Texas allows 4 types of divorce.
Litigation where both parties to the divorce retain attorneys. The attorneys prepare for and attend hearings as necessary for Protective orders, restraining orders, temporary orders on child-related issues, use of the house and car, spousal support, and payment of bills. During this time there is an adversary relationship and a process of discovery begins to identify community property which will be split according to Texas community property laws. There is a number of opportunities to negotiate the distribution of assets and child issues and when close, both parties proceed to mediation. If no agreement is reached a trial will start 9-12 months after the divorce decree is filed.
Uncontested divorce is the least expensive and quickest way for both parties to exchange information, agree on division of assets and is more common when there are no children involved. Financial planners are an excellent resource to help the couple evaluate their individual financial needs and then determine the most appropriate way to split the assets to satisfy those needs. The couple can then take their agreement to an attorney to draft the documents and file.
Mediated divorce is the process in which a neutral 3rd party, the mediator, sits down with you and your spouse to help the communication and resolve the issues amicably. Upon agreement, an attorney draws up the divorce papers.
Collaborative divorce in Texas involves each spouse hiring an attorney, working cooperatively and often across the table in the same room. A mental health counselor and or financial planner may be included in the process. Information is exchanged cooperatively and a joint inventory is prepared. All issues are negotiated and an agreement is drafted. Sometimes there is a need to go to mediation. However, if the collaborative process is unsuccessful, the spouses must retain new attorneys and move to Litigation. Usually it takes 4-6 meetings and 5-6 months on average to finalize the divorce.
As you can imagine, the costs associated with each type differ based on how many attorneys are needed and the amount of time it takes to come to an agreement.
Distribution of Assets
The keys to a timely divorce is agreeing on the issues relating to the children and what is an equitable distribution of assets. Distribution of assets in a community property state is typically 50%-50% between the spouses. However, there are 2 ways to make this happen; equal distribution and needs based distribution.
An example of equal distribution is to split a $100,000 401K down the middle giving $50,000 to the husband and $50,000 to the wife. However, women typically are in need of more liquid assets as they may be under employed or returning to the workforce after raising children and do not have the same income as men. If a woman needs to cash in the $50,000 401K to pay bills, after taxes and penalties, it may only net $32,000. In a needs based distribution a financial professional would substitute other liquid assets in place of the $50,000 401K. An example would be where the wife receives $50,000 from a savings account or cash from a house closing in lieu of the 401K, allowing the husband to keep his $100,000 401K but trade out another asset in its place.
When dividing up assets after an inventory is created, it is important to understand what each party to the divorce needs to survive.
Get your Assets together.
Go through household files and make copies of everything you can find: tax returns, bank statements, check registers, investment statements, retirement account statements, employee benefits handbooks, life insurance policies, mortgage documents, financial statements, credit card statements, wills, Social Security statements, automobile titles, etc. If your spouse is self-employed, it is important to gather as much information as possible about the finances of the business. Make copies of any financial data stored on your home computer. Inventory household and family possessions including major items: furniture, artwork, jewelry, appliances, automobiles, etc.
Know the household budget and expenses.
If possible, go through your check register for the past year and write down each utility, mortgage, and other household expenses for each month. Track miscellaneous purchases and cash you spend to get an accurate picture of your expenses. Quick trips to fast food, Walmart, and Starbucks add up quickly.
Find out exactly what your spouse earns.
If your spouse earns a regular salary, it is easy to look at a pay stub; if your spouse is self-employed, owns a business, or receives any portion of income in cash, do your best to keep track of the money flowing in for the last year. Be wary of money that might be concealed in months prior to the decree being filed.
Examine your own credit history.
Open a bank account and Apply for a credit card in your own name and use them now to establish a credit history. If you have a bad score, pay off the credit cards.
How we can help
Brown and Freeman, LLC specializes in helping couples find a peaceful means to a divorce. We work with couples to organize their financials, individually develop a financial plan to determine their lifestyle needs and then come together across the table to find an amicable agreement. We find this process is much friendlier, retains more assets for the use of the couple and promotes faster healing.