13 Financial Mistakes to Avoid During A Divorce
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A divorce is usually seen as a major change in personal life. Even though the emphasis is on emotions, a divorce is more than that. It is a change of your overall life-circumstances and it needs to be carefully thought through and budgeted, just like any other venture.
Overseeing the costs of a DIY divorce
If you and your partner feel confident enough to manage the divorce process on your own, there is nothing wrong with that. If your finances are straightforward and you can agree on all matters, especially arrangements regarding children, you should, by all means, do it.
However, you should seek professional advice to make sure that your finances are handled appropriately, as well as the paperwork involved. Failing to do so, could cause complex issues down the path.
Going in with your heart and not your mind
Putting your emotions aside during a divorce may be difficult. The only way you can get the best result and ensure that your future is not jeopardized is by using your reason. Do not abuse divorce proceedings to get revenge on your spouse, nor give up your rightful entitlements in order to alleviate their pain. This will help you save during the divorce and secure your finances in the long run.
Not using mediation services
If you have managed to successfully suppress your emotions, you should be ready to come to an agreement. Using services of a divorce mediator could help you significantly reduce costs of the proceedings. As long as your spouse is ready to cooperate, you should not have second thoughts.
Misinterpreting the services of a mediator
A large number of experienced divorce mediators will help you come to a fair settlement. On the other hand, this is not the essence of their job, and you should not rely on them to advocate for you. A mediator is there to ensure the quality of communication between two sides. It is up to the parties involved to negotiate the terms and protect their own interests.
Failing to get the assets valued
The most difficult part of any divorce is the financial settlement. In order to come to a mutually beneficial agreement, it helps to have everything documented in writing. Appraise all of the assets involved, and know their exact value instead of making it a subject of a debate.
Not providing, nor insisting on all of the existing financial documents
For the same reason listed above, you should gather all of your financial documents and expect from your partner to do the same. Learn to understand the documents and use them to adjust your expectations. If you find this task too demanding, hire professional help. Knowing your exact position will help you protect your interests.
Keeping joint accounts, credit cards, and loans
The moment you decide to get divorced, you should separate your finances. If they become a part of the proceedings as such, they could further complicate the financial settlement. It is usually easier to divide cash than it is debts, even though they also require your attention. Pay off your shared debts and refinance your loans so they are either non-existent or in the name of one spouse only.
Being overly attached to assets and belongings
Over-attachment to something mainly due to its emotional value can often be devastating. One of the major assets in this category is your family home. Consider whether you will be able to manage the property with your income after the divorce. Also, consider everything you are losing in other to keep the belonging you are emotionally attached to and compare the net worth.
Not considering the taxes
Although they are often overseen, taxes are a great part of every divorce settlement. Due to different natures of assets you may receive through the divorce, it may be difficult to establish the exact amount of taxes. This is why you should hire a professional to assist you. This is best done during evaluation of a proposed settlement.
Not evaluating a proposal of the settlement
The major trait of every settlement proposal is its ability to secure your future. This is exactly what you should look for when evaluating the settlement. In order to do this effectively, you need to have a plan of your budget after the divorce. Look at the long-term value of the settlement, including the inflation, and make sure that it matches your budget.
Relying on your lawyer for everything
Most lawyers apply hourly rates for legal advice. This is why you hire them and where their expertise can be invaluable. However, do not use them or expect them to run your errands, nor be your personal assistant.
You should be in charge of collecting the required documents, making the copies and providing them in due time. You should be able to memorize or write down your appointment times.
Write a list of questions you have for your lawyer and schedule an appointment. Properly utilizing the time you spend with the lawyer will ensure you get the most for your money.
Hiring an expensive lawyer
Hire a decent lawyer based on their references and not their price. Not all top lawyers charge the upper-scale prices. A lot of them take into account the importance of a quality service and overall client satisfaction. This leads to further recommendations and more prospective clients.
Failing to change beneficiaries on your insurance policies and your will
If your spouse was a beneficiary of your life insurance policy, change that to name your children or one of your family members a beneficiary. If you have a will, amend it so it does not include your now ex-spouse and does not create a potentially complex issue after your death.
Also, by naming your children a beneficiary in the case of your death you could ensure there are funds to support them even when you are not around. The same applies to your ex-spouse.
The fact that it can be done several ways and it entirely depends on individual circumstances, makes a divorce very difficult to budget. What anyone going through the process can do, is seek professional advice in order to have each individual point covered and thus save every step of the way.
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