FINANCIAL MISTAKES PEOPLE MAKE IN DIVORCE
Money and Kids. These are the top two worries clients have when they come into my office. Financial mistakes are easier to avoid if you have a plan and know what’s coming. Here are a list of the top financial mistakes people make in divorce so you can avoid making them yourself:
Not creating an accurate post-divorce budget
Even if you plan of settling your case or using mediation, use the court mandated family court affidavit to make sure you remember all your expenses. And don’t estimate. Get out credit card and bank statements. It is vital that you know how much you need to live on after the divorce and what those actual expenses are.
Not insisting on getting all of your and your spouse’s financial documents.
This is absolutely essential if you want to settle your divorce fairly. If you go through the court it is the law.
Nothing causes people to make more divorce money mistakes than not getting the financial documents that show whether their budget and balance sheet are accurate reports of their financial situation, or simply creative fiction. Make sure that what you think is true is true. Don’t take your spouse’s word for it or rely on your own memory.
Not getting assets valued.
The only way to really know what your house is worth is to get it appraised. What you value your house at may be wildly different from what it is actually worth. You need to know the real value.
The same thing is true for pensions. Unless you hire a professional to figure out what the present value of a pension is today, you can’t know what it is really worth.
Dividing assets without knowing what they are worth is almost guaranteed to be a mistake .
Insisting on keeping the house
The family home is often one of the most difficult assets for couples to reach an agreement on. Often it represents security and memories and both parties are hesitant to let go of that part of the past. However, often keeping the house is a huge financial and practical burden that inhibits divorced spouses from creating a new life. Think long and hard about how keeping the house will affect your bottom line and if you want to be saddled with it long term.
Not using a financial professional along with your divorce lawyer
If your financial situation is fairly standard, your lawyer should (hopefully) know enough about finances and taxes to help you make a good financial settlement. But, if your finances are complicated, if you own multiple businesses, or have lots of different investments, you may need to either consult with a divorce financial planner, or hire a divorce attorney who has a strong financial background.
It is also a huge mistake not to carefully review your financial documents yourself. Your lawyer may not be able to spot expenses that don’t make sense or other financial red flags the same way that you can.
Not understanding how taxes will affect your support and settlement.
There is no way you can know how taxes will affect a divorce settlement. Divorce lawyers for the most part are not tax attorneys. Make sure you get solid advice from a tax professional. Community property settlements, spousal support and asset divisions can have big tax implications that affect your quality of life.
Forgetting about the long term.
Plan for the time when your support runs out. Invest in yourself and your own education. Divorce can be a time of great positive change and even rebirth if you take the time to complete an abandoned education or train in a brand new career. Remember child support and spousal support will not last forever.
Not thinking about insurance.
Make sure any settlements including child support and spousal support payments are covered by life insurance. Also, figure out your health insurance needs post divorce BEFORE the divorce is final. Under our current system you may only have 60 days from the divorce judgment to obtain coverage in the marketplace.
Making settlement decisions based on emotions.
When emotions run high our brains literally are not thinking. We are locked in a flight or fight mechanism that results in bad decision. Making a financial decision based on a desire to keep the peace, out of guilt or out of a desire to hurt your spouse always ends badly. Settlements need to be made based on the facts or your situation and the law. It is important to have good advice from a professional before making an agreement.
Spending too much money on your divorce
Just because you can file something against your spouse doesn’t mean you should. Hire an attorney who has the wisdom to be your counselor and advisor and not just a litigator. Pursuing a property settlement thought the court is a lengthy, expensive and stressful experience. Make sure your attorney makes every effort to fairly settle your case before you chose that route. Divorce mediation is a wonderful tool that couples who have reached an impasse in negotiation can use to help fairly and practically settle their case.
Good luck and if you’d like to make an appointment for a pre-divorce coaching session please call 985-327-3024 or firstname.lastname@example.org. Remember, it’s easier to plan