Divorce may not be best financial option for women

All of these questions should be answered before you decide to file for divorce. Seeking professional financial assistance before the divorce begins helps avoid a desperate position by clarifying the tax and financial intricacies involved in divorce.

Attorneys and Mediators:

There is no requirement for an attorney to totally handle a divorce case. Using an attorney to handle all issues of the divorce can be very, very expensive. Attorneys are not trained in financial matters, yet charge their regular $200 to $350 per hour rate for this service, as well as their legal expertise.

Some attorneys will work as a consultant by the hour, allowing the divorcing individuals to gather financial data and arrive at a settlement through a mediator. A mediator is a totally unbiased party who guides negotiations, prevents rancorous discussions and helps find a solution to the most difficult issues in settlement. This will save both time and money. Texas courts require mediation before the court hearing; however, if you wait for this mandatory mediation held right before the trial, the pressure of the situation will hamper wise decisions. It is better to use mediation earlier in the process in order to allow for more rational decision-making.

Collaborative Divorce:

The Collaborative Law process provides an alternative to rancorous divorce proceedings, since both parties and their attorneys agree to full disclosure, cooperative meetings, and no litigation. A neutral fifth party financial planner works with both individuals to illustrate the long-range effect of a proposed settlement. Any matters requiring Court approval are negotiated and resolved before presenting to the judge.

The parties in a collaborative case avoid the adversarial relationship so typical of divorce, allowing them to move forward with much less bitterness and better communication between ex-spouses. Additionally, the negotiations remain private as opposed to the public venue of a court.

Traditional Litigation:

If the couple is unable to reach an agreement through mediation or attorneys' working on a divorce settlement, a court battle frequently ensues costing many thousands of dollars and leading to further acrimony between the divorcing individuals. This scenario is the last resort and can drain both parties both financially and emotionally.

Separating Emotions from Business:

Although it is understood that divorce is painful emotionally, try to separate the emotional upheaval from the business aspects. This will make it easier to make clear-headed decisions and work through negotiations. If emotions become overwhelming, call a friend or visit a counselor. A counselor can make the whole process much easier, assisting you in sorting through the emotions. Do not try to make important decisions when you are overcome with emotion.

Dealing with the Spouse:

It is especially important to be business-like with the spouse, since emotions can interfere with negotiations. Avoid allowing old battles to rekindle. Do not continue a meeting that degenerates into a battle. While you want to be clear about what is important to you, try not to make your demands excessive. Never use your children as a pawn to hurt the spouse or draw them into the litigation process, since they will suffer unnecessarily.

Keeping the House

Generally, the wife prefers to keep the home since children need continuity, although this may not be financially practical. A divorce financial analyst can analyze the financial data for you to be sure you are financially able to continue ownership of the home. Sometimes the payments can deplete available resources within a few years. Continued joint ownership of the residence with the ex-spouse is not advised, since this often creates grounds for disagreements and problems in the future. However, a clause in the divorce decree can provide for the sale of the home following the youngest child's 18th birthday, with the ex-spouse receiving one half of the net equity. While it may be possible to give the husband an asset equal in value to the home in order to provide a fair division, often this leaves the wife without sufficient income-producing assets.

Property Settlement Note:

If other assets are not available to offset the home, a property settlement note can be used. This is similar to a note at the bank, using the current interest rates. The property settlement note can also serve to avoid dividing the husband's closely-held business. The note may assist the wife with cash flow shortages following the divorce. Note, however, that a property settlement note is dismissable during bankruptcy.

Spousal Support (Maintenance) in Texas:

Texas passed a law granting spousal support in 1995, although the guidelines are limited, allowing no more than $2500 per month or 20% of the wage earner's monthly net income for a maximum of three years. This is sometimes available if you were married at least ten years and will not have sufficient property after the divorce for living expenses. This includes other resources available such as separate property. You are also eligible for maintenance if you have a medical or psychological condition that prevents you from working or if the husband was convicted of spousal abuse during the preceding two years. Spousal maintenance is non-taxable to the recipient and is not deductible by the payor.

Contractual Alimony:

Yes, it is possible to have alimony in Texas, provided it is agreed in the divorce settlement agreement. The provisions of Texas statutes pertaining to amount and number of years do not apply for contractual alimony. The payor is entitled to deduct the alimony payments from his taxable income, while the recipient is taxed on the income.

Child Support

Texas has child support guidelines used by courts and, while not mandatory, are considered to be in the child's best interests. The guidelines provide for a percentage of "monthly net resources" to be paid in child support, with an increased percentage for additional children. The monthly net resources include all sources of income after taxes calculated for a single individual with one exemption. The percentages of monthly net resources based on number of children are: one child, 20 percent; two children, 25 percent; three, 30 percent; four 35 percent; five or more, 40 percent.

These percentages apply to the first $6,000 of monthly net resources. The court can order additional support based upon proven needs of the child if the spouse earns in excess of this amount. All child support is subject to an "order for income withholding" deducting child support from the parent's paycheck. An additional sum may be added to cover the cost of health insurance for the child or children.

Note that child support is not dismissable during bankruptcy.

Debts during Separation:

Separation from your spouse is usually the legal key to relieving you of debt he incurs after separation. However, from the creditor's standpoint, it does not necessarily relieve you of liability, since they may hold you liable in spite of separation or divorce. You should cancel joint accounts and transfer balances to new cards in each person's name. Additionally, write letters to the creditors notifying them of the pending divorce and that you are no longer liable for the account.

Tax Issues:

In dividing marital assets, the after-tax value of each asset should be considered before the final settlement is reached. IRAs, 401ks and pension payments are taxable at ordinary income tax rates as payments are received (and possibly penalties for early receipt before age 59.5). These assets should be valued at an after-tax amount for purposes of equitable settlement.

Renting or Buying:

If you are moving due to the separation or divorce, consider renting for a year or so until the emotional and financial turmoil have subsided. This is a time of