This post discusses the five common mistakes people make when dividing their finances during a divorce and tips on how to avoid them:
1. Hanging onto the house at all costs.
Many couples scrambling to obtain a divorce settlement wish to keep the house at any cost. However, financial experts say that more attention should be given to who can afford to maintain the property, pay the mortgage, and manage the taxes. While it is possible to ask for spousal support to help make the mortgage payments, unexpected maintenance costs may pop up, and make home ownership more of a liability than a luxury.
2. Failing to make a clean financial break.
Clean separation of assets and debts is another difficult task, but one that is absolutely necessary, or the consequences can be devastating. Although the task may seem insurmountable, the alternative is much worse. Having a spouse drive up your debt when you're not married anymore can seriously affect one's credit score.
3. Counting on your ex to honor financial commitments.
Depending on your former spouse to comply with financial arrangements is also a huge mistake. Although both parties in a divorce are beholden to a court-ordered divorce agreement, creditors do not fall under that arrangement. If your ex spouse is supposed to pay the mortgage, but doesn't, the lender is going to sue both of you. If your ex fails to pay the mortgage, you may be hurt when applying for future loans.
4. Forgetting to change your will and beneficiary forms.
Wills and trusts can also be seriously impacted by divorce proceedings. If divorced spouses wait unnecessarily long to change a beneficiary on a will, for example, the money may go to the wrong person - your new spouse may get nothing, while your ex spouse inherits the amount provided for in your will.
5. Overlooking taxes.
Finally, NEVER forget which amount of money in your divorce settlement is alimony, and which amount is child support. Whereas child support payments are not taxable to the recipient, alimony payments are. Furthermore, there are limits to how long a person can receive such payments - child support payments can no longer be received once the child turns 18 or is done with college, while spousal support generally ends once the recipient remarries or cohabitates.
Should you be in the midst of a divorce or contemplating divorce, contact the Law Offices of Renee Lazar either through email or telephone 978-844-4095 to schedule a FREE one hour no obligation consultation.