In this post, we will look at how a divorce can affect your assets. These include joint accounts, co-mingled assets, and more.
Tips for dividing property fairly
Generally, under Texas’ community property laws, all assets that either party acquires during a marriage belong to the couple. Thus, when they divorce, parties will divide community property equally. Ensuring you receive your fair split of these assets involves:
- Correctly categorizing property as community or separate
- Valuing your property accurately
- Conducting a thorough audit of your assets
- Possibly canceling or freezing joint accounts
- Keeping property intact to retain value
When it comes to physically distributing property, this can occur in a variety of ways. Some accounts can just be divided in half; physical property like a car or home cannot. Thus, parties must assign a value and distribute assets accordingly.
This process can require considerable negotiation or, in some cases, litigation to decide who gets specific items and keep the scales balanced.
One big mistake to avoid
Unfortunately, too many people take deceptive measures to try and increase their share of the property in a divorce. They hide or give away property. Sometimes, parties intentionally undervalue an asset or lie about information like income.
Hiding assets in any of these ways is a serious mistake. Not only can it result in financial penalties, but it is also illegal. You also risk losing your credibility in the eyes of a judge.
What are co-mingled assets?
Co-mingled assets refer to property or money that was separate when individuals acquired it but became marital property during a marriage. Considering the unique nature of these properties, they can spark conflicts and confusion when spouses divorce.
Why classification is crucial
During your divorce, you will divide property into one of two categories: property that is eligible for division and property that stays with one person.
Under Texas community property laws, property possessed by either person at the time of divorce is presumed to be community property and, therefore, eligible for division.
However, parties do not divide separate property. This includes property a person had before marriage or gifts or inheritances acquired by one person during the marriage.
With that in mind, separate property can become community property through co-mingling. This can happen in several ways. Someone might mix separate funds into a marital account or use marital funds to pay off, maintain or improve separate property.
Because property status affects whether parties divide or keep it in a divorce, correctly classifying assets is crucial.
Classifying co-mingled assets through tracing
Asset tracing involves examining an asset to classify it using one of several methods. While these methods are complicated, parties can generally expect tracing to investigate:
- The source of the money
- When and where a person deposited the money
- How parties spent that money
- Titles
- Property values
- How much parties spent out of a co-mingled account
Understand that you are not required to handle asset classification and tracing yourself. Often, divorcing spouses retain the services of attorneys and financial professionals to investigate these complex economic situations.
Can you prevent co-mingling?
If you wish to avoid the complications that come with co-mingling assets, you have options to do so.
One option is to sign a prenuptial or postnuptial agreement identifying separate property. Another option is to keep separate accounts.
Co-mingling assets is a complicated but not uncommon situation for couples. While managing these issues in a divorce can seem overwhelming, this information can help you make informed decisions to protect yourself and your finances.
Which accounts are considered joint?
Most married couples have at least one type of joint account. These could include:
- Checking accounts
- Savings accounts
- Credit cards
- Lines of credit
- Mortgages
The assets and debts held in these accounts could belong to you, your ex or both of you.
Accounts could be separate property if you opened them before you were married, as could the money either party collected or contributed before the wedding.
Keep in mind that even if you think money is separate because you collected it before marriage or received it through inheritance, it can become community property if you put it into a joint account.
Dividing your joint accounts
Texas is a community property state. This means that generally, every asset and dollar acquired during a marriage belongs to the community, or the married couple.
So, the money in your joint accounts will likely be divided equally between parties. Even if you contributed more than your ex or vice versa, joint accounts are typically community property and subject to equal division.
Tips for protecting money in joint accounts
If you have joint accounts and are divorcing, one of the most important things you can do is open your own accounts. This allows you to keep your finances separate after filing.
It is also crucial that neither party withdraw funds without approval from the courts or the other party. If you or your ex take out money to hide or spend it, the courts can hand down a punishment requiring that person to reimburse or reward the other party for misusing those funds.
The money in joint accounts can be a source of stress and conflict when dividing assets in a divorce. However, understanding more about these accounts and what happens to the money in them can help you avoid costly mistakes and assumptions about your rights.
Securing your financial future
Every person wants their fair share of property in a divorce, and these suggestions can help you do this.
You can also take additional steps to feel more secure with your financial future. You can:
- Open your own credit cards and bank accounts
- Consult a financial professional to create a budget
- Avoid overspending or taking on new debts
- Get help with filing your taxes
- Reassess your financial goals
These measures can help you feel more confident in your financial health after divorce. And accomplishing this can make it much easier as you start a new chapter.
