Money Mistakes to Avoid When You’re Getting Divorced
Divorces are tough enough without succumbing to financial pitfalls in settlement negotiations. For example, if you’re in need of debt settlement, divorce can complicate matters. Still, couples will generally be more satisfied with their divorce outcomes when they’ve agreed on terms in lieu of going to trial. With that said, here are some money mistakes to avoid when you’re getting divorced.
It costs more to keep up two households than it does one. That’s a no-brainer, especially if the couple is sharing custody of children who need bedrooms in both residences. Still, it’s commonfor newly divorced people to underestimate their living expenses. A finance expert can help here.
Having Incomplete Information About Your Finances
If during the marriage your spouse made most of the financial decisions, you may not have a full picture of your finances. So, when you know a divorce will occur, get your hands on recent tax returns, loan documents, credit reports and credit card statements. You also want to gather savings and checking account statements as well as those from pension and retirement accounts.
Take photos of safety deposit box contents and get valuations of tangible assets. Determine which assets are marital property and which are separate.
Battling for Unaffordable Assets
It’s common for couples to have strong disagreements over which party gets the family home. You may have emotional attachments to the property or assume the custodial parent keeps the residence for the sake of the children.
You must make a clear-eyed evaluation of whether you can financially handle a house buyout or the ongoing expenses of home ownership. Another option may be to continue to co-own the house for a time post-divorce, although that may be fraught with financial and other risks.
Not Factoring in Assets’ Income Potential and Liquidity
Don’t forget that income-producing assets such as rental property may have more of an impact on your financial future than other assets that don’t generate income.
Also, you could encounter future cash flow problems if,in the settlement, you take a majority of illiquid assets instead of assets that can be easily converted to cash.
You also don’t want to have unrealistic expectations about future hikes in assets’ value or investment returns.
Not Considering Possibly Hidden Assets
It’s not that unusual for a spouse to hide assets. Be on the lookout for signs of this behavior, such as the sudden disappearance of art, jewelry, or other valuable items of personal property.
You may want to ask the court to issue a temporary restraining order to bar the selling, transferring, or disposing of assets without legal or spousal authorization.
Not Anticipating Debt Issues
While the two of you must establish a way to fairly divvy up responsibility for debts, there’s no guarantee your spouse will follow through or that other snags won’t occur. It’s important to get a copy of your credit report so you’re aware of all accounts.
Pay off and close any joint accounts if you can. You may have to liquidate joint assets,and then refinance other obligations in the name of the responsible spouse. Keep track of payments if your former spouse is paying off a joint account, which means the account must remain open.
There are a myriad of money mistakes to avoid when you’re getting divorced.Knowing what not to do, you can better get through it and enjoy your new life. A good lawyer and financial counselor can help you as well.