Introduction:

Divorce can be an emotionally challenging experience, but it's crucial to make sound financial decisions during this time. By avoiding certain mistakes, you can minimize the financial damage and position yourself for a fresh start. In this article, we will discuss the top financial mistakes to avoid in a divorce settlement.

Rushing the Process:

Many divorcing couples want to finalize the divorce quickly to move on with their lives. However, rushing the process can lead to an unfair division of assets, especially for the more vulnerable spouse. Take the time to locate and properly value all assets and liabilities with the help of professionals.

Refusing Mediation or Arbitration:

Consider alternative dispute resolution methods like mediation or arbitration. These processes can save time, money, and stress compared to litigating the divorce in court. While hiring individual attorneys is recommended, mediation or arbitration allows both spouses to have more control over the outcomes and keeps family matters private.

Misvaluing Marital Assets:

Obtain independent valuations of major assets, especially complex ones like businesses. This ensures a fair division of assets. Consider factors like premarital asset values and ongoing maintenance costs associated with certain assets. Seek professional assistance from mediators, arbitrators, or judges to ensure an equitable division.

Not Considering Hidden Assets:

Spouses may attempt to conceal assets using various methods. Hiring a forensic accountant or an attorney specialized in finding hidden assets can help you identify and claim what you're entitled to. Obtain court orders to compel your spouse to disclose their assets and seek assistance from financial institutions to uncover any hidden accounts.

Being Saddled with Marital Debts:

Identify and understand all marital debts, including consumer debts and business liabilities. In community property states, both spouses may be responsible for each other's debts. Uncover any hidden debts and work towards paying them off or refinancing them to assign responsibility to the appropriate party.

Not Getting Your Fair Share of Retirement Assets:

In a divorce, retirement assets need to be divided fairly. A qualified domestic relations order (QDRO) allows for the equitable distribution of retirement plan assets without incurring early withdrawal penalties. Seek guidance from a certified public accountant (CPA) to understand the long-term financial consequences of dividing retirement assets.

Not Thinking Long Term About Child Support:

Consider all aspects of child support, including regular expenses, future educational expenses, medical expenses, and extracurricular activities. Also, evaluate the need for a life insurance policy to secure alimony and child support in the event of the supporting ex-spouse's untimely death. Understand how the divorce might affect financial aid for college and address tax-related issues associated with child support.

Handling Your Own Divorce:

While it may be tempting to handle the divorce yourself, it's advisable to seek legal representation. Family law attorneys and CPAs can provide valuable expertise and ensure that all assets and liabilities are accounted for, fairly valued, and divided without incurring unnecessary taxes.

Conclusion:

Divorce is undoubtedly a challenging time, but avoiding these common financial mistakes can help protect your interests and secure a better future. Seek professional guidance, take the time to understand your financial situation, and make informed decisions to achieve a fair divorce settlement.