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Early IRA distributions and splitting property in a divorce

Divorce is on the decline for most age groups, but for people over 50, it is on the rise. Older couples in Texas who are ending their marriages may have accumulated a significant amount of shared property that needs to be divided. This could include a retirement account.

If the account is an IRA, it can be divided with a divorce decree. However, in some cases, a person may have begun taking 72(t) payments from the IRA before the age of 59 1/2. There are certain situations in which this is allowed without incurring a 10% penalty, but if the account undergoes what is known as a "modification", the penalty will need to be paid on the distributions. From the way a modification is described in IRS regulations, it sounds as though splitting an account as part of a divorce would be considered one.

Internal challenges often associated with divorce

It doesn't matter if it's your idea to get a divorce or your spouse caught you off guard by requesting one, you're likely to struggle with the idea of how you'll get your life back on track in the future.

There are a variety of internal challenges often associated with divorce, all of which you need to address at the appropriate time. While no two people are the same, here are some of the challenges that may be front and center in your mind:

  • The idea that you did something wrong: Depending on the circumstances, you may blame yourself for the divorce. Even if you did nothing wrong, it's still easy to look at the past and wonder if you could have made things right. Regardless of what went wrong, you can't go back in time. It's best to turn your full attention and energy to living a better life from this point on.
  • The fear that you'll be alone for the rest of your life: You may not like the idea of spending time alone, but keep in mind that it can be healthy for you. This gives you the opportunity to assess your life, including what you want out of it in the future. Then, when you feel up to it, you can start to date again. Don't rush into anything. You'll find the right person in time.
  • Concerns about your relationship with your children: Divorce is hard enough when you don't have any children together. But if you do, it has the potential to result in many challenges. There's nothing you can do to completely eliminate these concerns, but a well thought out parenting agreement and visitation schedule can help.

Why consider a postnuptial agreement?

While a growing number of people in Texas are considering prenuptial agreements before they marry to determine some key financial matters, it may also be possible for people to reach this kind of agreement after marriage. While prenups were once widely considered a matter for celebrities or the ultra-wealthy, more people see the advantage of determining how their funds will be separated in advance. These agreements can be especially important for people with an inheritance or a privately owned business as property division in a divorce could have a significant impact on each.

A postnuptial agreement is a financial contract between spouses who are already married. Similar to a prenup, this kind of contract determines how certain assets will be divided in case of a divorce or separation. While it can seem like a sign of a troubled marriage, a postnup can be an important contribution to financial planning. For example, one spouse may be scheduled to receive a major inheritance or family asset that they want to be able to share with their spouse. However, their family may want the asset to receive greater protection and avoid risk in case of a later divorce.

Developing a parenting schedule after a divorce

Divorce can be a difficult process for a lot of people in Texas. When a divorcing couple has kids, the divorce can get even more complicated. That's because even though a couple may wish to go their separate ways, they may have to stay in contact in order to share parenting responsibilities.

Parents will need to come up with a schedule for custody and visitation after a divorce, and the schedule may need to be updated over time. The age of the child will be a big factor in determining how much time the child will spend with each of their parents. If a child is in the baby or toddler stages, the primary caretaker will most likely care for the child exclusively while the other parent will be allowed to have visitation with the child. This is because very young children need to form an attachment with their primary caretaker, and leaving that parent will be too stressful.

Why January is a popular month for divorce

It isn't uncommon for couples in Texas and throughout the United States to get divorced in January. This is partially because they may feel more stress during the holiday season, and they may decide that it's better to avoid going through the same experience in the future. Others may decide to file for divorce in January as a means of giving themselves a fresh start in the new year.

Parents tend to wait until after the holiday season as a means of protecting their young children. Parents want to make sure that their kids have at least one more happy Thanksgiving or Christmas dinner with their relatives.

How to talk about a prenup agreement

Couples in Texas who are planning to wed might be considering a prenup agreement. While some people feel anxious about what this might mean, experts recommend signing one as it can clearly define financial boundaries and avoid additional problems in case of a divorce. However, for many people, talking about the prenup can cause distrust and anger. One way to avoid this is to approach the conversation empathizing with a future spouse's concerns while still being honest about what each expects.

In the past, people associated prenuptial agreements with wealth, but today, getting a prenup is a good idea for those of modest means too. Whether both spouses are coming into the marriage with assets such as homes and businesses or only one is, establishing what will be considered separate and marital property from the beginning protects both. Because prenups are tailored to the needs of each couple, they can include a sunset clause where the prenup expires once the couple is married for a pre-established number of years. It can also be specific about certain assets. For example, if one person bought a house before the marriage but their spouse will help continue paying for the mortgage after they marry, a prenup can establish the shift of ownership as time goes by so that both spouses become owners as their marriage continues.

Make a financial plan before a divorce

While the divorce rate in the United States has gone down since the 80s, about 39% of marriages still end in divorce. Since divorce can be financially devastating, couples in Texas should learn about a few steps they can take to get their finances ready before splitting up.

Some spouses have benefited from discussing their finances with a financial planner, especially if they have not had the most active role in managing the family's money. These professionals could help a client deal with tax laws, asset distribution and other aspects of finance that will help them to be sure that they get a fair settlement in a potential divorce.

Parenting marriages can benefit the children and reduce stress

Once you decide that your marriage is over, your first instinct might be to file for divorce. If you have children, this might not be the best option. A better solution might be remaining in a parenting marriage with your child's other parent. This isn't a conventional choice, but some parents are finding it useful when the situation arises.

Sometimes, couples know that the marriage is over for years before they finally choose to act on the decision. Once this is done, everyone involved will begin to feel the pressures. As the process drones on, the stress might increase. This is partially because of the gravity of what's happening and partly because of the fatigue that starts to set in.

Hague Convention rules for international possession disputes

International travel is increasingly simple for people in Texas and all over the world. The ease of international travel and the presence of international opportunities for employment make it more likely that a person will move and live abroad. When combined with a marriage, divorce or children, this can give rise to complicated issues of child possession. For example, there may be questions as to which country's laws are applicable when a parent removes a child from the country.

The Hague Convention contains provisions that relate to international child possession matters. It is a treaty that has been ratified by 98 countries and provides a protocol for the adjudication of child possession issues where the laws of more than one country are involved. In cases where a child has been wrongfully transported to another country, the Hague Convention's Article 3 calls for the prompt return of the child to the country in which he or she habitually resides.

Unique issues women face after divorce

Texas residents who have gone through the divorce process realize the toll that divorce can take. Both men and women are affected by divorce, but there is a body of evidence indicating that the way it affects them is different.

An example of this is the financial impact divorce has on women in comparison to men. On average, women earn 81% of what men earn. When their marriage comes to an end, women may experience a decrease in income of around 20% on average. Men, on the other hand, might see an increase in their income to the tune of around 30%.

Law Office of B. Diane Heindel, P.C.
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Tyler, TX 75701

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Law Office of B. Diane Heindel, P.C.