This article looks at three financial mistakes people make in divorce and how to avoid them.
Divorce is a painful process even in the best of situations. Not only is a marriage coming to an emotional and legal end, but both spouses will have to deal with the financial fallout from their divorce. While no divorce is cheap, there are ways to minimize the financial repercussions of ending a marriage by ensuring that property division is approached in a prudent and rational manner. By avoiding some of the most common financial mistakes that are made in many divorces, those going through a divorce will be better equipped to protect their own financial interests.
Make a long-term plan
To get the best deal possible in a divorce it is first necessary to know what one will need after the divorce agreement is signed and put into effect. The truth is that post-divorce life is substantially different than married life. People going through a divorce should not simply assume that their future expenses will simply be half what they and their former spouse were paying while they were together. In most cases, single life is more expensive than married life. For those who have typically let their former spouse handle the financial aspects of their relationship, it is essential that they begin understanding what expenses, including utility bills, property taxes, and grocery bills, they will have to take on after their divorce is finalized.
What to do with the house
As the Wall Street Journal notes, one issue that tends to lead to particularly bitter arguments is ownership of the marital home. Many people going through a divorce simply assume that holding onto the marital home is a “win,” but many fail to look closely at what home ownership after a divorce entails. While the burden of paying property taxes, utilities, and maintenance costs on the marital home may have been bearable in a marriage, for a newly single person such expenses can quickly leave one house poor. Furthermore, other assets may provide greater financial benefits with fewer drawbacks, such as pensions and other retirement funds.
Seeing the big picture
As USA Today points out, it is easy during divorce to suffer from a sort of tunnel vision and end up attaching too much importance to one issue. Divorce, however, is a major undertaking and it is important not to lose track of the big picture. For example, when negotiating a settlement, it may be possible to give up certain assets that provide few long-term benefits in exchange for higher spousal maintenance payments. In other cases, it is important not to overlook the tax implications, including capital gains taxes, of holding onto certain assets.
Every family is unique, which is why every divorce also needs to be approached according to a person’s unique needs and interests. An experienced family law attorney can assist those who are going through a divorce, including by advising them on how certain legal options may impact both their immediate and long-term best interests.