Law Offices of Randy Wilson and Kristin Postell, PLLC


Trusted And Aggressive Advocates In
Family Law And Criminal Defense

In Texas, mistakes in alimony and divorce can cost extra

On Behalf of | Jan 27, 2014 | Military Divorce |

Many divorces have numerous complicated details that can cost one party thousands over a lifetime. In Texas, many parties can forget to look into the details that can either save or cost one party more money than they can imagine. Alimony, Cost of Living Adjustments (COLA) and retirement accounts are just a few of the ways many parties can make a huge financial mistake.

When the term “alimony” is discussed, many parties will think of it as additional funds coming out of a net pay instead of their pre-tax income. Determining who will be responsible for the taxes on the alimony can subsequently change the overall bottom line. If the party who pays the alimony is responsible for the taxes, it will be in addition to the alimony paid to the recipient. This could cost the responsible party tens of thousands of dollars over the course of several years.

Some parties may forget to adjust monthly pensions with the yearly increase cost of living. A pension is paid out — like most annuities — over the course of years or even the lifetime of a recipient. Since it is difficult to put a dollar value on a beneficiary’s pension, a percentage is determined and applied to the divorce proceedings. If the COLA is not addressed, the recipient will not receive an adjusted amount when the cost of living increases annually, as the beneficiary will.

Another major account many parties may make a mistake on is when calculating the passive appreciation on retirement accounts. If a party had either a 401k or IRA account before marriage, the interest amount received to the non-marital portion is not to be distributed between the two parties. Rather, the interest received to the non-marital part will stay with the original party. This can save the original owner of the account thousands of dollars.

When filing for a divorce in Texas, having someone who can remember many key details can save one party a monumental amount over a lifetime. Alimony, 401K, IRA and COLA can be just a few areas where someone can make a mistake. As many parties would agree, the advantage may be found in the details.

Source: The Huffington Post, Three Costly Divorce Settlement Mistakes and How to Avoid Them, Christian Denmon, Jan. 21, 2014

Martine Hubbell AV Preeminent | Peer Rated for Highest Level of Professional Excellence 2020
Martindale Hubbell Peer Review Rated 2015 | For Ethical Standards and Legal Ability
The College of the State Bar of Texas Proffesionalism Through Education
Lead Counsel LC Rated
Rated By Super Lawyers Kristin Postell | Selected in 2020 Thomson Reuters
Rated By Super Lawyers Kristin Postell | Selected in 2022 Thomson Reuters