Divorce can be a challenging and emotionally draining process. Sometimes, this can lead individuals to overlook important details in divorce agreements, leading to more stress later on. A seasoned Austin divorce lawyer from Smith & Bledsoe Family Law can help you create a comprehensive agreement. What are the things often overlooked in divorce agreements?
If you are going through a divorce process in Texas, it’s crucial to ensure your agreement fully addresses every factor that may lead to future disputes and complications, including the financial aspects of divorce. Five common divorce settlement mistakes that could lead to issues if not addressed are retirement benefits, healthcare, debts, taxes, and parenting plans.
Division of Retirement Accounts and Benefits
According to Texas law, almost everything either spouse receives while married is “community property.” This community property includes retirement accounts, like 401(k)s, pensions, IRAs, and other retirement savings plans. The court will determine who gets what percentage of each of those assets during a divorce. Some things to think about regarding your retirement accounts are:
- Qualified Domestic Relations Order – A QDRO is essential for dividing certain retirement plans, such as 401(k)s and pensions between spouses. Without this order, the non-employee spouse may not receive their fair share of the retirement benefits.
- Tax Implications – Divided retirement accounts can have different tax implications for each party. It’s vital to understand the consequences that transferring or withdrawing funds from these accounts will have on your taxes.
- Future Benefits – Consider the future benefits of retirement accounts, such as survivor benefits from pensions, which can significantly impact the financial security of the receiving spouse.
Healthcare and Insurance Coverage
Healthcare is a critical component often overlooked in divorce agreements, particularly regarding the continuation of health insurance and the handling of future medical expenses. Some things to consider relating to healthcare include:
- COBRA Coverage – Federal law allows for continuing employer-sponsored health insurance for a limited time after a divorce. Understanding where your insurance will come from after a divorce is essential to avoid a lapse in coverage.
- Children’s Health Insurance – Your agreement should specify who is responsible for maintaining health insurance for your children and how you will split medical expenses. These expenses should include regular check-ups, emergency care, and any long-term medical and dental needs.
- Life Insurance Policies – If you or your spouse have life insurance policies, you must change the beneficiaries on the policies so that any payments will go to the proper parties after the divorce.
Debts and Liabilities
Divorce agreements should clearly outline the division of debts and liabilities to prevent future disputes. These debts may include mortgages, credit card debts, personal loans, and other financial obligations. You should consider:
- Debt Responsibility – Your agreement should specify which party is responsible for which debts. It’s crucial to remember that divorce decrees do not bind creditors, so both parties may remain liable unless the debts are refinanced or transferred.
- Joint Accounts – Close or remove the non-responsible party’s name from all joint accounts to prevent future liability. If your name is still on an account that you no longer use, you could be on the hook for any debt incurred on that account.
- Hidden Debts – Conduct a thorough financial disclosure to uncover any hidden debts that may impact the division of assets and liabilities. Some spouses attempt to hide assets so they leave the divorce with more than their ex. A spouse may also attempt to hide debts for a similar reason.
Tax Considerations
Taxes can significantly impact the financial outcome of a divorce. However, they are often not adequately addressed in divorce agreements. Your post-divorce tax situation may be a critical factor in the division of marital assets. Some of the tax implications you should consider are:
- Filing Status – After a divorce, your filing status will change, and you and your ex may need to decide how to file for the year of the divorce. Will you file jointly or separately? How does that impact the size of your tax bill?
- Dependency Exemptions – As part of your agreement, you should determine who will claim your children as dependents on their tax returns, which can affect tax credits and deductions.
- Spousal Maintenance – Divorces finalized after 2018 have different rules regarding alimony (also called spousal maintenance and spousal support) and taxes. Spousal support payments are neither tax-deductible for the payer nor taxable for the recipient. This change comes from the Tax Cuts and Jobs Act of 2017.
Parenting Plan Specifics
A detailed parenting plan is an essential child custody consideration in divorce to prevent conflicts and make sure the well-being of the children is first and foremost. When divorce agreements lack specific parenting arrangements, misunderstandings and disputes can arise. Some of the items your parenting plan should include are:
- Custody and Visitation Schedule – To prevent conflicts, create a clear and detailed schedule for custody and visitation, including holidays, vacations, and special occasions. You should include contingency plans, as well. If one parent can’t take the children for one week, how does that affect future weeks?
- Decision-Making Authority – Outline how you and your ex will make major decisions regarding your child’s education, healthcare, and extracurricular activities. You should both be on the same page to avoid future conflicts.
- Communication Methods – Establish guidelines for communication between yourself, your ex, and your children. These guidelines should include when and how communication occurs. Including a clause about technology and social media use may also be necessary.
Contact an Austin, Texas, Divorce Attorney
In Texas, overlooking critical details in a divorce agreement can have significant financial and emotional consequences. You can reduce your post-divorce stress by thoroughly addressing the division of retirement accounts, healthcare and insurance coverage, debts and liabilities, tax considerations, and specific parenting plan details.
Consult an experienced family law and divorce attorney to develop a comprehensive agreement. At Smith & Bledsoe Family Law, our team of lawyers can assist you in developing your divorce agreement and ensure that it reflects your best interests.
Contact our law office at (512) 277-3166 or contact us online for a free case evaluation. We’ll sit down with you to understand your situation and what you hope to get from your divorce. And we’ll explain the implications your divorce may have on different aspects of your life. Check out our success stories and learn why you should trust us with your case.