Portrait of John K Grubb

Texas Divorce and Prenuptial Agreement

4550 Post Oak Place, Suite 201 • Houston, Texas 77027-3139

Phone: 713-877-8800 • Fax: 713-877-1229

Use a Prenup to Avoid Tax Problems

In addition to their other benefits, prenuptial agreements can help couples decide how to deal with their taxes. Here are two areas that couples often put into prenups regarding their taxes.

Income and Deductions

Spouses can specify to whom income and wages go. This is particularly useful when one spouse brings a business to the marriage and the other spouse will not be taking part in running the business.

In a community property state like Texas, a family law court will generally assume that income acquired during the marriage belongs to the couple’s marital or community property. A prenup can specify that this is not the case and that certain income belongs only to one spouse. Likewise, there may be particular deductions that are available to the couple. The prenup can specify who will make use of the deduction if the couple files separately.

Property Transfers and Tax Consequences

Couples often want to include a property transfer in their prenup. The transfer can take place either before they marry or after they divorce. The timing of the transfer will have tax consequences for the couple.

Suppose a wife transfers property to her husband before marriage, and, in exchange, the husband agrees not to pursue additional property from her estate in the event that the two later divorce or she dies. The Internal Revenue Service considers this transfer a gift, and the wife will have to report any increase in value of the gift as taxable income. Additional details on how couples can avoid negative tax consequence through prenuptial agreements are available from a Texas prenuptial agreement attorney.

If a similar transfer takes place after the marriage, just after a divorce, for example, the IRS does not recognize this as a gift, but as incident to the divorce. For these transfers, the IRS does not calculate gains or losses, enabling spouses to bypass tax consequences.

Did tax considerations play a role in your prenup or divorce?

John K. Grubb & Associates, P.C. – Houston divorce attorneys

No Comment

Comments are closed.