Beside dealing with the death of a loved one, a divorce is one of the most stressful events a person will go through. A divorce brings out intense emotions and they are not cheap to pursue. A divorce can cost tens of thousands of dollars. On top of that, a person can lose out on assets and money to which he or she is entitled ust for making certain mistakes during the divorce process.
A divorce consists of many elements. One wrong move can cause a person to lose out on thousands of dollars. After a divorce, you want to make sure you have money you need to start a new life on your own. Make it happen by avoiding these common financial mistakes.
Solving your problems by shopping is not the best solution in a divorce. You want to avoid spending as much money as possible so you can save up for your new life. Your spouse is not going to be paying your bills anymore, so every purchase is on you. Only buy the things you need until you are financially stable.
Cashing in Investments
Be wary of cashing in stocks, bonds, and retirement plans. You may end up owing significant taxes on these investments by cashing them in early. If you need some cash to pay bills, think about selling other stuff you no longer need.
Not Paying Shared Debts
You and your ex-spouse may have credit cards, cars, and personal loans in both your names. Even if the other party promises to pay off certain debts, do not automatically assume it will happen. You are just as responsible for paying the debts as your ex-spouse. If he or she does not pay them, the creditors will come after you for payment. Lenders do not care about any divorce agreements. If the loan is in your name, be prepared to make payments.
Miscalculating Property Values
If you have a business, vacation home, heirlooms, stocks, collections and any other assets of value, it is important to understand how much they are really worth. While you might think these assets are not worth much, you could be wrong. Property values can go up or down over time and you do not want to assume something is worth less than it really is. It is helpful to have an appraiser get a true valuation of any significant assets so you are not short-changing yourself in the end.
Thinking Equal = Fair
Florida is an equitable distribution state, which means that assets are divided fairly in a divorce. However, keep in mind that fair does not always mean 50/50. Fairness is based on each party’s contributions to the marriage. If the wife worked full time and took care of the kids while the husband barely worked and was out partying all the time, then the percentage could be 70/30 or 80/20, in favor of the wife. However, if both parties worked full time and took care of the kids, then the split would be closer to 50/50. When deciding on assets, make sure you take into consideration any assets that generate income (such as rental properties) and any tax implications, as these can make your asset worth more or less.
Spending Too Much Money on Lawyers
While you may need a lawyer to help you get the settlement you deserve, do not feel like you need to consult him or her on every little detail. Your lawyer should not be used as a therapist or family planner. Remember that lawyers charge hundreds of dollars per hour, so use them wisely. Every 15-minute consultation adds up. If you need someone to talk to, enlist the help of a therapist or a close friend or family member.
Fighting for the House
You may have gotten attached to the marital home, but hanging onto it after a divorce may be more trouble than it is worth. Mortgage payments, taxes, insurance, and maintenance are all things you will need to pay for on your own. Can you afford to do so? If you have children, then staying in the marital home is a good way to maintain stability for their sake, as long you can afford it. However, if it is just you, then moving into a small apartment may be more cost-effective. Plus, it will offer you a fresh start.
Not Getting a Qualified Domestic Relations Order
If you or a spouse has a pension plan or a contribution plan such as 401(k), 403(b) or 457 plan, make sure a Qualified Domestic Relations Order (QDRO) is in place. This legal document reflects how you and your ex-spouse will be dividing the plan. It also orders the plan administrator to pay the other spouse their court-ordered share, and this can not be done without a valid QDRO. If a QDRO is not in place during the divorce, the parties can lose out on their rights.
Not Having a Financial Plan
It can be hard to stay focused after a divorce, which is why having some sort of plan in place is essential. Think about your goals. Do you have children you need to put through college? Are you saving for retirement? Do you have plans to travel? Think of what you want to do with your life and sit down with a financial planner who can help you meet your goals.
Seek Legal Help
A divorce can cause serious financial ramifications for someone who is not prepared or aware of the various issues that can occur. Your decisions during divorce can affect you for many years and even the rest of your life.
Palm Beach divorce attorney Scott J. Stadler can assess your situation and help you make the right decisions during this difficult time. To get started, call (954) 346-6464.