If you are considering a Massachusetts divorce, carefully read through the following examples of costly mistakes made by divorcing couples. Experts from the Wall Street Journal made a list of the following costly divorce mistakes that couples should strive to avoid.
1. Staying in the house
Though there’s nothing wrong with wanting to stay in the family home, but experts are quick to warn this can often end badly. Parents are especially vulnerable to the lure of remaining in the family home, eager to avoid disrupting the kids, changing schools or abandoning the place of so many happy memories. Though all this makes sense on an emotional level, it is crucial to analyze this decision from a financial perspective.
Remember that the home was maintained by a family, often with the help of two incomes. Are you going to be able to afford to pay off your spouse for his or her share of the equity in the home? How about going forward, can you afford the taxes, maintenance and mortgage on your own? You need to be sure before you make such an expensive commitment. In some cases, it makes more sense for the parties to agree to sell the house, split the equity, and then find new homes that they know they can afford.
2. Overlooking money
It’s often the case in marriages that couples divide the responsibility for managing their money. One spouse may be in charge of some bills, while the other handles others. It’s not uncommon for one spouse to be responsible for managing all the money. The problem with these approaches in a divorce is that ignorance can prove tremendously costly. If you have no familiarity with the household finances, you will be at a distinct disadvantage when it comes time to divide the assets and debts. After all, how can you demand half of what you never knew existed? The best plan here is usually to take the necessary time to familiarize yourself with the assets and debts before separating. Make copies of as much paperwork as you can. Comb through statements and make an effort to learn what valuable items and accounts you own, so that you may pass that information along to your attorney.
3. Failing to budget
Another common but costly divorce mistake is to fail to plan properly for the future. You may be used to years, maybe even decades, of having two incomes, and downsizing to only one can come as a shock. Make a list of household expenses and be sure to prioritize, listing the extra expenses that can be reduced in the event of a cash crunch. You need to prepare for a possible dramatic decrease in income, depending on whether you or your spouse served as the primary breadwinner. Burning through savings to temporarily cover the gap is a recipe for disaster down the road, as the money will eventually run out, leaving you even worse off than you were before.
Though it can be easy to succumb to the desire to punish your soon-to-be former spouse, remember the following words of wisdom: The less you spend, the more you keep. It’s just as true when it comes to your divorce as it is with any other financial matter. Be very wary of hiring attorneys or other experts who are eager to push you into an aggressive and confrontational divorce if that can possibly be avoided. Though you should absolutely fight for what you are entitled to, pushing to get even more can ultimately be counterproductive. Bitter battles over money can leave couples with less money to divide between themselves.
Though it’s something that most people would prefer to avoid, the reality is that taxes consequences are an important consideration in a separation or divorce, especially those involving larger pools of marital assets. Helping identify issues like these is a perfect illustration of why you need an experienced, knowledgeable South Carolina family law attorney on your side. For instance, the Wall Street Journal article gave a great example of how important this can be. An expert noted that a husband in one case offered to give his wife a retirement account worth $2 million, while he would kept a different account, also worth $2 million. So what’s the problem? Sounds fair, right? Wrong. The wife’s account was worth $2 million in tax-deferred retirement savings while the husband’s was after tax. That means the wife would face steep penalties if she ever need to access the money before retirement – something the husband wouldn’t.
6. Relaxing too soon
Some couples are both ready to collapse as soon as their Divorce Decree is signed, as the process can be long and draining even under the best of circumstances. However, experts point out that they shouldn’t rest just yet, as there still remains important work to be done. For example, those going through a divorce should be sure to change their beneficiary designations on their life insurance policies, retirement accounts, etc. – all of which can easily slip your mind. Additionally, both parties should update their Wills and their estate plans after the divorce is final. After all, you don’t want your ex-spouse to still be listed as inheriting your estate or being your medical power of attorney.
Contact the Law Offices of Renee Lazar for a free no obligation consultation to discuss your particular needs if you are contemplating a divorce or are in the midst of a divorce.