During a divorce settlement, there are some big mistakes that you want to avoid. Check out this guide to learn what they are.
Up to 95 percent of divorce settlements are made out of court. And while that may save a lot of headaches and frustration, it opens the door for mistakes.
From overlooking the tax consequences to skimming the final document, there are numerous pitfalls you need to avoid as your divorce settlement will have lasting consequences for your financial future.
Check out this guide to learn about the most common mistakes and how to avoid them.
1. Don’t Neglect the Bigger Picture
With up to 44 percent of people undergoing divorce reporting high stress, it’s important not to get lost in the minutiae of the process and lose sight of the bigger picture
Start to think about the divorce settlement as you would a business transaction.
That means avoid getting into an argument about who gets to keep the collection of dusty records or other possessions. Instead, always keep in mind what matters. Ask yourself throughout the process whether each decision is actually in your long term interests.
2. Failure to Hire Your Own Experienced Lawyer
Many couples don’t think they need their own lawyer. After all, if it’s amicable it could be unnecessary, especially with the high costs of hiring a divorce lawyer.
But if things take a vitriolic turn, you won’t have a safety net—notably a professional lawyer fighting in your corner. What’s more, you’ll probably save a lot more money with an experienced lawyer ensuring that you don’t make any mistakes during the process.
3. Overlooking Hidden Assets
You’d be surprised by what people hide from their spouse. In fact, we know that one in five Americans hides a bank account or credit card from their spouse.
They may have been transferring money to a friend for years without your knowledge. Or, they could be undervaluing some old antiques that they told you was worthless junk.
If you have reason to believe you’re not getting the full story, you could hire a private investigator or a professional accountant to uncover the true value of your spouse’s assets.
4. Damaging Your Credit Score
Frustrations leading from money is one of the biggest causes of divorce. And yet, it’s also a complicated aspect during the divorce settlement.
Always check which credit cards have your name on them. If your name appears on a credit card, you have a responsibility to it and should make sure you pay any outstanding balances immediately. You don’t want to come out on the other side of your divorce with a poor credit rating.
5. Misjudging the Value of Your Assets
You need to determine the value of your assets. This isn’t always easy, especially when they’re large.
For example, if you own a property, you need to get an up-to-date evaluation. This needs to be conducted by a certified professional rather than a quick guess after a Google search.
The same applies to other assets. Do you have any expensive jewelry? Do you own any valuable artworks? Misjudging the value of your assets could lead to trouble in your divorce settlement.
6. Being Careless About Your Retirement Plans
Many married couples have joint retirement plans. When you get divorced, this can undermine any retirement plans you had.
Ensure that you understand the implications for your retirement including your 401(k) and IRA.
7. Unable to Afford the Divorce Settlement
You don’t want to agree to a divorce settlement that you cannot afford.
Even though the prospect of leaving a fractious relationship for stress-free singledom seems attractive, you need to stay focused on the future as well. Check how the divorce settlement could impact your future and whether you could afford to live comfortably on the money for the rest of your life.
Likewise, you may be granted assets in the divorce settlement which won’t be able to access for years.
8. Not Getting Insurance for Support Payments
If you have spousal or child support written into the divorce settlement, this could be extremely important to your financial future. What happens if your ex-partner can no longer make payments? They could become unemployed, bankrupt or even ill.
That’s why you need to ensure that you have a backup plan. You may want to apply for life insurance to protect your financial future.
9. Forgetting the Tax Implications
The tax implications for your divorce settlement can also be complicated.
If you receive spousal support, this is taxable income. However, if you pay spousal support, this is tax-deductible.
You need to ensure that you consider the tax consequences of your divorce settlement. You may not have such a favorable settlement once you take taxes into account.
10. Not Reading Every Word in Your Divorce Settlement
When you have finished the divorce settlement document, the last thing you want to do is go through it with a fine-tooth comb. But that’s exactly the last thing you should do. The legal jargon on the page could affect your life forever so it’s vital to make sure you understand everything written down in the document.
If there is anything you don’t understand, ask your lawyer to explain it to you until it’s clear in your mind as well.
Contact Husker Law for a Free Consultation
Many people make mistakes during the divorce settlement that have huge consequences for the rest of your life.
You can significantly reduce the probability of anything going wrong with your divorce settlement if you have a divorce lawyer batting for you.
If you want to learn more about our legal services, call our experienced professionals today at (402) 415-2525 to arrange a free consultation.