713-333-4430Protecting Family Assets During a Texas Divorce: End-of-Year Financial Review
As we approach this holiday season, the days seem to run faster; before you know it, the year is coming to a close. It’s a time when many of us reflect on the past twelve months and think about what lies ahead. For families going through a divorce in Texas, the end of the year is also a critical time to assess finances; are your assets adequately protected? By reviewing, you can plan and welcome what will hopefully be a steady and successful new year. Divorce can be difficult, but taking proactive steps now can help prevent complications down the line, especially when it comes to dividing property.
Texas is a community property state, meaning assets and debts obtained during your marriage are generally divided equally between spouses. While it appears relatively straightforward, the reality is correctly labeling and assigning assets and liabilities is much more complicated, and a generous amount of proper planning is needed to safeguard your hard-earned assets. Careful attention must go towards assessing, categorizing, and managing assets correctly. A lack of knowledge and awareness can lead to disputes, financial missteps, and regret. Conducting an end-of-the-year financial review can save you from unnecessary headaches and secure your financial future as you move into the new year
If you are already amidst a divorce or if you’re just beginning to think about it, now is the perfect time to take stock of your financial situation. Here are steps you can take to help protect your family’s assets and ensure you’re on solid footing heading into the future.
Why An End of The Year Financial Review is Crucial During Divorce
End-of-year reviews aren’t just about looking at tax records or preparing for the new year. They provide an excellent opportunity to step back and take a fresh, organized look at your financial surroundings–especially if you’re navigating divorce. The process will help you avoid costly surprises, catch any mistakes or missed details, and prepare you for the legal and financial changes that are around the corner.
By reviewing your financial situation now, you can spot areas that require your attention, like shared accounts that need to be separated, assets that need to be protected, and debts that need to be tackled. Addressing these elements before the divorce process fully commences can make the entire experience smoother, less stressful, and more financially steady.
How to Actually Protect Those Assets
Well, every divorce situation is unique. However, some general steps apply to most people looking to protect their assets. Use the guide below to pinpoint some of the key actions you may need to consider to secure your financial interests during your upcoming divorce.
- Organize Financial Records Start by gathering all important financial documents, bank statements, investment records, credit card accounts, tax returns, property deeds, vehicle titles, and anything related to inheritance or gifts you may have received. You’ll need these documents to clearly distinguish between separate and community property. Typically, Texas courts divide community property equally, but separate property, like those gifts received during marriage and assets owned before the marriage, should be excluded. It’s critical to have solid documentation, so it’s worth the time to organize everything meticulously. Getting your records in order will help you avoid misunderstandings during the divorce and provide your attorney with the documentation needed to protect your interests.
- Review Joint Accounts If you and your spouse use or have joint accounts, whether it’s a checking account, credit cards, or loans, now would be the time to start reviewing them and identify which accounts need to be closed or separated. You’ll also want to track all the recent transactions in these accounts carefully. During a divorce, these records will play a critical role in the division of assets, so keep clear and accurate records, as they will help you avoid disputes over spending during this time. In other cases, you may also be able to identify red flags of spouses overspending, financial negligence, or expending out of emotion, which can happen during a divorce. For some cases, you may want to consider freezing joint accounts to prevent further withdrawals or new debts from accruing. Work with your attorney to determine the best plan of action to protect your finances while still adhering to Texas divorce laws.
- Avoid Commingling Assets One of the most common ways for separate property to lose its status as separate is through commingling, which can happen when separate property, like an inheritance or a premarital asset, gets mixed up with or lopped in with community property to the point where it becomes too difficult to tell the difference. Let’s say you deposit an inheritance into a joint account or use it to manage any of your marital expenses; it could be viewed or argued as community property. To avoid these unfortunate and expensive errors, keep the property in separate accounts and maintain clear records of how it is used. If you’ve already come across commingled assets, it’s essential to work with an attorney to try and trace the origins of the property and ensure that it gets correctly classified.
- Take Stock of Liabilities Along with assets, liabilities (debts) also need to be addressed. It’s prudent to take an honest inventory of all liabilities, including mortgages, car loans, student loans, and credit card balances. Make sure to document which debts are tied to community property and which are tied to separate property. Knowing what you are responsible for and how these liabilities are going to be divided can help prevent surprises when it comes time to settle. A precise understanding of the liabilities you are responsible for saves you from major headaches during negotiations. Further, it aids in establishing a path to fair division of financial responsibilities.
- Update Beneficiary Designations and Estate Plans As part of your end-of-year financial review, you should also examine your beneficiary designations for items like life insurance policies, retirement plans, investment accounts, and other financial assets. Divorce can significantly modify these arrangements, so you will want to make sure that they reflect your current wishes. Specific provisions in your will or estate plan may be automatically revoked upon divorce in Texas. Thus, it’s imperative to update those documents as well. A skilled professional, like an attorney, will ensure your estate plan and beneficiary designations are appropriately updated to reflect your post-divorce circumstances and wishes.
How to Make Sure You’re Doing It Right
Divorce, especially in community property states like Texas, can be emotionally straining and complicated, especially when it comes to dividing assets. While conducting an end-of-year financial review is a great first step, having an experienced family law attorney by your side is vital. They will put your financial interests at the forefront to ensure your long-term financial well-being.
A skilled Texas family law attorney specializing in divorce will know how to differentiate between community and separate property, advocate for a fair division of assets, work towards an equitable settlement, and prevent financially consequential mistakes. Taking proactive measures alongside your financial review can give you the confidence to move forward with clarity and security.
If you’re ready to protect your assets and ensure your financial future is neat and secure, contact our skilled family law attorney at 713-333-4430 for a confidential consultation. Let us help you ring in the new year with peace of mind.
Shannon L. Boudreaux is a passionate advocate for her clients, working on their behalf to help them reshape their lives, their families, and their futures. For two decades, she has helped reunite parents with their children and helped clients negotiate contentious custody disputes. Learn more here.
