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Division of property issues: Inheritance and debt

Tuesday, December 12, 2017

When a couple starts divorce proceedings in Texas or elsewhere around the country, finances are frequently the most contested issue. Division of property is of concern to all parties involved and can be a very complicated process. Financial advisors offer suggestions regarding possible actions to take while a couple is still together that can possibly prevent future disputes should a divorce occur.

One spouse may be aware of an inheritance that will be received in the future. Should he or she want to keep those funds out of a divorce settlement, the funds should not be used for any joint expenses. If any part of the inheritance is used for household expenses or mortgage payments, the remaining funds could be subject to division with the other spouse. Analysts recommend that the inherited monies be kept separate in the heir's name only. If the funds produce taxable income, experts even suggest paying taxes on the income from a separate account.

Another common issue in a divorce is credit card debt. In divorce proceedings, the name on the credit card is not necessarily determinative of whether the financial obligation is a community debt or a separate one. If the debt was incurred before the marriage, it will typically be considered the separate debt of the party who originally incurred the obligation. If the debt was incurred during the marriage, it may be considered community property, depending on a number of factors. This aspect of debt distribution during divorce is separate from the legal obligation of the credit card holder vis-a-vis the lender.

Going through a divorce can be an emotional process, especially when discussing division of property. A knowledgeable Texas lawyer can help clients establish plans to protect their financial positions during a divorce. An experienced attorney is a valuable source of information to help someone navigate the complexities of divorce proceedings.

Source: hometonlife.com, "Keep inheritance away from shared finances to protect it", Rick Bloom, June 4, 2017

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