Avoid these common financial mistakes when divorcing
go through, on par with the death of a loved one and losing a job. Many people who go through divorce are tempted to rush through the process, just to get it over with. However, being hasty during a divorce often leads to people making serious financial mistakes that can come back to haunt them later after the divorce is final. Those considering divorce should be aware of some of the common financial errors people make during the process and how to avoid them.
Ignoring financial realities
While going through a divorce may be a difficult time to try to make important financial decisions, people need to make an accurate assessment of their financial situations so that they know what they need to ask for in the property division. People need to establish budgets, listing all their sources of income for the month as well as their monthly expenses. Additionally, people need to look at their long-term financial needs, such as what they need for retirement investments or for college tuition for children of the marriage.
Each spouse should also have a clear idea of the family’s overall financial picture. This is particularly critical if one spouse handled the couple’s finances. The spouse who did not take care of money matters should acquaint him or herself with the family’s total assets and liabilities. Each spouse should be aware of all accounts they hold jointly as well as joint lines of credit.
Hanging on to the house
Many people fight to keep their marital homes during divorce, particularly if they have custody of children. Parents often believe that divorce will be less traumatic for children if they do not need to move. However, sentimental attachment to a house can make poor financial sense. Unless the spouse keeping the home can afford the mortgage payments, taxes, insurance and maintenance, it is better for the couple to sell the home and split the proceeds.
Additionally, when a spouse gets the marital home in a property settlement, it often means he or she foregoes claim to more liquid assets. If the spouse needs cash in the future, he or she may end up needing to sell the home anyway.
Forgetting beneficiary designations
In the flurry of activity that accompanies dividing marital assets, many people forget to change the beneficiaries on life insurance policies, retirement accounts and other similar assets. People should review the beneficiaries named on all such assets so that their ex-spouses do not end up inheriting property that people intended for others after the divorce.
Not hiring an attorney
Some people believe that they have no need for an attorney when divorcing. They think they can agree with their spouses enough to get the divorce accomplished without using lawyers, or that they do not have enough assets to justify the cost of an attorney. However, hiring an attorney can make the process go much more smoothly and ensure that everything is handled properly. Hiring an attorney also ensures a person that there is someone else looking out for his or her rights during the process. A lawyer can review property settlement agreements to make sure they are fair and that one spouse is not taking advantage of the other.
If you are considering divorce, speak with a seasoned divorce attorney who can discuss your situation with you and advise you of your options.