Top Mistakes to Avoid in a Divorce Settlement
Tanessa Munck, 32, was married to a high-powered attorney in Schenectady, New York. She accepted it when he told her he had to work late and on weekends. She didn’t question the phone calls during dinner that would take him back into the office most weeknights.
She had a comfortable lifestyle and didn’t see any reason to rock the boat. She also didn’t see a reason to wonder about the family’s finances. She let him handle those. One day, her husband handed her divorce papers, and Tanessa’s life spiraled out of control.
The divorce went quick as her now-ex knew the lawyers for both sides — they had played poker together. The judge was a golfing buddy on top of that.
Tanessa made some elementary mistakes. Errors that can be avoided for anyone who goes through a divorce — or suspecting a divorce may be somewhere in the future.
The gravest mistake is being clueless about household finances. If your mate has managed the household’s economic decisions and you are left in the dark about joint earnings and holdings, your partner will hold an advantage. If you believe your spouse may be intending divorce, talk to an attorney and gather as much knowledge as you can. One of the first things a lawyer may tell you to do is make duplicates of:
- Bank account statements
- Retirement records
- Savings accounts
- Credit card statements, and
- Tax returns
Failure to Consider Mediation
If you and your mate find it possible to work together in reaching an equitable settlement, mediation would be something to consider. Resolving a divorce through mediation might save thousands in attorney fees not to mention the aggravation. The method involves an unbiased third-party qualified in mediation meeting with the couple and helping to reach an arrangement. Mediation is voluntary, and the mediator is not a judge and will not demand a specific consequence or agreement.
Hiring a Combative Attorney
Hiring a pugilistic lawyer to castigate your spouse is never a good idea. First, most judges won’t reprimand your spouse economically just for being a bad person. Second, hiring a lawyer to discipline your partner will cost you as the amount of hours invested in the case will rise. Higher lawyer hours mean higher fees which mean less assets and money leftover. Take the sentiment out of the split and treat the situation as a mercantile arrangement.
Not Recognizing the Common Enemy
Work with your spouse and a divorce fiscal planner to reduce the taxes you will pay during the breakup and following divorce. Don’t forget that both are liable for taxes due. If you have a complicated tax issue consult with an experienced family law barrister.
Divorcing persons often undervalue living costs when they work on their first budget. Items like temporary alimony are overlooked or minimized, and not enough is set aside. Using a financial expert to provide an authentic and comprehensive budget is a must.
Forgetting Tax Impact in Divorce
Remember even after the divorce is finished, you can still be taxed on the assets you acquired through the settlement. For example, your spouse manages all the investments and proposes a 50/50 split. Sounds good but keep in mind the importance of the investments on an after-tax basis. Then decide.
Not Evaluating Settlement Proposals
Try to determine how a divorce settlement might affect your finances in the future. There are multiple factors to think about — assets, incomes, living expenses, inflation and child support — are just a few examples. Specialized divorce computer models are available to help review comprehensive and realistic analysis of a post-divorce lifestyle.
An incontrovertible fact of divorce is that two households cost more to manage than one. Many divorcing couples don’t realize that the divorce settlement must last awhile — possibly even the rest of their lives. Financial planning with the help of persons trained in the legalities and realities can protect your future — today.