The fundamental cause of complicated divorce proceedings is money, which leads to couples making a series of financial mistakes that cost them a lot of money. The financial decisions made during the divorce process are complicated, and they are frequently accompanied by strong feelings of hurt, contempt, and frustration.
Divorce is an emotionally draining journey that can lead to financial mistakes that will come back to haunt you later. As a result, it’s vital to be aware of these missteps that could jeopardize your financial stability.
Here are seven frequent financial blunders that couples make while negotiating a divorce settlement, along with simple solutions suggested by Tarrant County Divorce Lawyers.
1) Failure to consider the Divorce Settlement’s Long-Term Consequences
A divorce’s immediate psychological and emotional impact can be devastating. Leading to unwise financial decisions in the hopes of settling the matter as soon as possible. Even if a settlement appears to be fair; it’s a good idea to think about the long-term consequences before agreeing to the terms.
For example, an equal division of marital assets like the house, investments, and jewelry may appear to be a reasonable option. However, if not carefully examined, these could become a problem in the future.
If you decide to keep the house, keep in mind that it is a significant cash outlay (mortgage payments, property taxes, upkeep and repairs, and utility charges), which will prove to be a burden in the long run.
Assess the proposed settlement by calculating its financial impact. Consider the impact on assets, incomes, living expenses, inflation, spouse support, taxes, retirement plans, investments, medical bills and health insurance premiums, and child-related expenses like education.
Ignoring these factors will lead to an underestimation of future needs, lowering your quality of life. As a result, it’s a good idea to hire a divorce attorney and a financial advisor that specializes in realistically assessing divorce settlements.
2) Believing that an equal distribution of assets is equitable
By no means is the worth of marital assets defined or restricted by their present market value. A house that generates money through rent, for example, may be worth more than the market value. Equal distribution of the property’s monetary value in this situation does not imply that each partner will receive an equal amount in the coming years. Before separating such assets, consider the whole picture and aspects including taxes, capital gains, investment losses, timing concerns, and inflation.
In addition, each country has its own laws governing the financial settlement and allocation of marital assets. For example, Illinois law recognizes a fair distribution of property rather than an equal split of property as is the case in jurisdictions such as Texas. If you live in Texas, a knowledgeable Divorce Lawyers Tarrant County can provide you with the necessary information as well as represent you in court during the divorce process.
3) Failing to Take into Account Marital Debts
You should consider dividing not only the marital assets but also the marital debts while getting divorced. This eliminates the possibility of one spouse bearing the brunt of the marital debt.
The consequences of shared credit are frequently overlooked by couples. Lenders and credit card companies will hold you both liable for the payment default, which will have a major impact on your credit score. A debt accumulated during your marriage years is a shared burden that must be paid off jointly by you and your partner, regardless of whether the spouse used his or her credit card. As a result, before you finalize your divorce, think about paying off all of your debts.
4) Failure to secure alimony or child support payments through insurance
If you will be receiving alimony or child support payments, you should consider purchasing an insurance policy to protect yourself. This income may come to an end if your ex-partner dies or becomes disabled.
If your spouse is hesitant to make this commitment, you might propose a divorce agreement that allocates a portion of your alimony or child-support payment to this purpose.
5) Making Attempts to Hide Assets
Spouses frequently hide their money through trust, donations, and even cryptocurrency like Bitcoin. Divorce lawyers, on the other hand, are professionals in this sector; and with the help of modern digital technologies, they can quickly uncover the truth.
It is against the law to hide assets during a divorce. During the divorce process, avoid putting money or assets aside. You can deceive your spouse and even your lawyer; nevertheless, breaking the law will damage your credibility in court, subject you to harsh penalties, and give your spouse an edge in the divorce procedures. As a result, it is best to report all assets upfront in order to facilitate a quick and equitable divorce settlement.
6) Ignoring Tax Consequences
When a judge gives you alimony; for example, the Internal Revenue Service (IRS) deems it taxable income, whereas your husband can deduct it as a tax deduction. Similarly, if you agree to an equal share of assets and liabilities; one of you may wind up paying more taxes than the other. To understand the tax implications of any proposed property partition and alimony, consult an expert divorce attorney and a certified divorce financial analyst.
Retirement accounts are more complicated than other assets since they are subject to stricter tax restrictions. Make sure your divorce agreement contains a Qualified Domestic Relations Order (QDRO) that recognizes an alternate payee who will receive the retirement savings as well.
7) Forgetting to Consult Experts During the Divorce Settlement Process
Divorce is a complex legal process that can come with a lot of unpleasant shocks. Furthermore, the stress you’ll be under during this time may cause you to make emotional decisions that aren’t always in your best interests.
During this difficult time, you will require psychological, financial, and career counseling in addition to skilled legal advice. Make sure you’re not going through this difficult period by yourself. To make informed decisions and ensure your future, speak with the relevant professionals; such as a qualified psychologist, a financial planner, a tax consultant, and/or a career-guidance expert.
