Divorce and Finances
Six Critical Financial Mistakes
Becoming a Financial Victim
Divorce can be devastating, in and of itself, but if you suspect
your spouse is planning a divorce, make copies of all important
financial records such as account statements (saving,
stockbroker, real estate, partnership) and data that relates to
your marital lifestyle (checking accounts,
charge card statements, tax returns ). If you believe that your spouse
may liquidate or re‐title marital assets,
notify the holder in writing and get a restraining order.
Bringing an Emotional
Attachment to Assets to Divorce Negotiations The marital
residence, a pension you earned, a painting
purchased during your marriage these assets bring an emotionally
charged debate to divorce negotiations. The fact is many parties
cant afford the house and give a low priority to
retirement planning. A house is an asset that has a low return
on investment (real estate appreciates at
the rate of 2 or 3 percent annually and is a major cash expense
mortgage payments, taxes, repairs, heat, and
electricity)
Disregarding the Impact of
Taxes on Assets in Divorce Settlement The bottom line is
the share of marital assets you receive after the tax man gets his.
Consider the value of your assets relative to your
spouse on an after tax basis. Do not make the mistake of
failing to recognize your common enemy the
IRS. Work together with a divorce financial planner or tax accountant
to minimize the total tax you and your
ex‐spouse will pay during separation and after divorce and share the
money you save. Do not forget that both
parties are liable for taxes due as a result of audits on joint
returns.
Not Producing an Accurate
Budget Invariably clients underestimate or omit expenses
when they produce their initial budget for
temporary maintenance and later on in the divorce process complain
about not being able to pay bills. It is imperative that both
parties seek the help of a financial
professional to produce an accurate and complete budget.
Using your divorce Lawyer
as a Financial Planner, Therapist or Messenger Avoid using
your lawyer to arrange parental visitations.
Attorneys generally charge $200 to $300 an hour and are not skilled
therapists or certified financial planners. If you need
emotional support, career counseling or financial
analysis, utilize qualified professionals and save big money in
lawyers fees.
Failure to Develop a Post
Divorce Financial Plan One indisputable fact of divorce is
that two households cost more to operate
than one, but income is unchanged. Many couples start their post
divorce lives not fully understanding that their settlement
must last a significant amount of time,
perhaps the rest of their lives. Financial planning can help people
transition from a married to single
lifestyle by prioritizing financial goals, developing realistic
expectations, and producing written plans for
allocation of financial resources.
|
