If you are getting divorced, you have a lot of issues on your mind, and dealing with finances is no doubt a prominent issue. This important area should not take a back seat; mistakes made at this time could haunt you for many years and impact you and your children. Here is more information about common financial mistakes people make in divorce and how to avoid them.
1. Failing to Gather Information Quickly
As soon as divorce becomes inevitable, gather information for the following, including the name that’s listed as the account or property owner, and make certain you have your own copy:
- Banking and savings accounts
- Life insurance
- Investment accounts
- Retirement accounts and pensions
- Tax returns
- Credit cards
- Other loans such as businesses, personal, payday or title, signature.
2. Failing to Protect Marital Assets
Be watchful over jointly held accounts, such as joint checking or savings accounts, for large withdrawals. In addition, you may need to take action to freeze certain accounts and holdings with a court order to prevent your spouse from transferring or hiding assets. Trying to locate these assets once they are hidden will take the work of a forensic accountant.
3. Failing to Consider Mediation
Divorce can be adversarial and lead to long, drawn-out and expensive court proceedings. If you and your spouse can meet with a professionally trained mediator to work out some of your issues, you’ll be saving money and time spent going to court. If, however, you believe your spouse is hiding assets, being dishonest, or refusing to be cooperative, mediation has little chance of helping.
4. Failing to Consider Taxes
You can be audited for joint returns even after your divorce, so having a tax expert review your previous several years of returns could be a lifesaver. If issues are found, amended returns can be filed to make corrections.
Additionally, when it comes time to split up the marital assets, a tax expert can evaluate the after-tax value of a given asset to facilitate more accurate valuations. What may look like a 50/50 split may not turn out to be a fair deal after all.
5. Allowing Your Emotions to Control Your Decisions
If the thought of letting go of the family home feels gut-wrenching to you, even though you are not sure how you’ll afford the mortgage, taxes, and maintenance, then you may be allowing your emotions to control your logic. Step back and take a non-emotional look at the house as a financial obligation before you get in over your head.
You can get through your divorce with your financial future protected if you take action and don’t make the above mistakes. Your divorce attorney will be able to assist you to put these tips into action.