When separating, people mostly worry about two things: their finances and their kids. Unfortunately, financial anxiety fails to protect those same individuals from terrible financial mistakes after a divorce.
The majority of financial errors made by divorcing couples are outlined below. After knowing them, you can avoid making them yourself. If you want to avoid such mistakes, you can contact the legal team of Karp & Iancu, S.C.
Financial Mistakes You Must Avoid During Divorce
Not Doing an Accurate Post-Divorce Budget Before Settling
Budgeting is a challenging task. Approximately 63% of Americans need to establish or stick to a budget. But reaching a divorce settlement without setting a budget is equivalent to attempting to go from Texas to Manhattan without a map. You will likely get lost along the journey, but you can make it. You have to figure out the amount of money you will bring in and how much you will spend once you are alone to determine if you will have enough to sustain yourself after the divorce.
Refusing to Ask for Access to All of Your and Your Partner’s Financial Records
People prefer going through and looking over old financial records for days on end. If you are not the world’s best record-keeper, it becomes far worse. It is unpleasant to dig through dresser drawers and closets full of disorganized paperwork. But if you want to reach a just divorce settlement, having this information is vital.
Not Calculating Your Assets
It can be challenging to get your house evaluated while divorcing. It is expensive and lengthy. However, selling or having your home evaluated is the only way to determine how much it is worth. It is perfectly fine if you decide not to take part in either. Please be conscious that the value you allocate to your home may differ substantially from its true worth if you choose to do that.
Not Considering the Long Term
It is essential to settle on a support package that will allow you to continue surviving after the divorce. But you must be ready for the day when your assistance ends unless you plan to get it for the rest of your life, which is highly unlikely today.
Investing in your education and well-being is now essential. It is time to retrain and retool if you are unemployed or underemployed. After your help stops, you must position yourself to sustain yourself at your highest level.
Not Considering Tax Implications
When you make a significant purchase, such as a car or a house, you do not forget to count the taxes you will have to pay along with the original price of the thing you are buying. The same rule should be applied to divorces as well. A divorce has tax implications as well. For example, if you and your ex-spouse consider liquidating your retirement accounts, such as your 401(k)s and IRAs, you should know that there will be some large tax implications.
It is important to consider hiring an attorney as well as a tax preparer.
Refusing to Try Mediation or Arbitration
Divorce can happen through various methods, including a court divorce, mediation, and arbitration. The latter two methods are the most recommended ones by attorneys since they involve less amount of time, money, and effort from both sides. Both mediation and arbitration offer more privacy, control, and flexibility for the divorcing couple.
Mediation is the process that involves a neutral third party called the mediator. They listen to both sides of the story and each party’s needs and help them reach a middle ground. The mediator does not make the final decision for the couple but helps facilitate communication and negotiation between them.
Arbitration is similar to mediation, the only difference being that the arbitrator (the neutral third party) makes the decision on behalf of the couple. Here, the arbitrator acts like a judge and resolves disputes between the parties.
Allowing Emotional Attachments to Rule Your Decisions
When it comes to divorce, nothing is easy throughout the process. After all, you are separating from the person with whom you thought you would be growing old. However, life can take unexpected turns, and you might have to take some steps unwillingly. It is crucial that you do not let your emotions control your decisions and think before every move.
Since it is easy to get carried away in a situation like this, having a divorce attorney by your side is a great help.
Not Considering the Possibility of Hidden Assets
Regardless of how much you trust your ex-spouse or how long you two may have been together, you should never blindly trust the other party in a legal procedure. If you think your ex-spouse is not trying to hide any assets from you, think again. Transferring assets to family and friends, creating bank accounts overseas, and making trusts are only some of the ways people try to hide their money so that they do not have to share it with their spouse.
Hiring a forensic attorney or one who specializes in investigating hidden assets in a divorce can help. Your attorney can even get a court order requiring your spouse to answer about their assets.
Not Knowing that Equal Division of Assets Is Not Always “fair”
During a divorce, both the spouses want an equal distribution of the marital assets. While it may sound like a simple process, dividing marital assets into two equal parts can be one of the most complex and lengthy parts of the process. You cannot accumulate all of your assets and wealth, put them in a big pot, and expect to take 50-50 from there.
Some assets, such as a piece of land or a house, may increase in their worth or value in the coming years. Such factors are considered when making the distribution, which makes it complicated. There is a lot of give-and-take through this process until you can finally reach a conclusion.
If you are going through a complicated divorce that is taking a lot of time, you need the assistance of an attorney. To avoid wasting your money due to your legal mistakes, hire an attorney today.
