From determining what will happen to the family home to how much is owed in spousal support, divorcing couples have several short and long-term decisions to make that will have a significant impact on their financial futures. Unfortunately, many couples feel the need to rush through these decisions just to end their marriage as quickly as possible. This shortsightedness could lead to an unfair divorce settlement and lasting implications for the future, so it is important to take the time and get the advice necessary to determine how each decision will affect you without allowing emotions to cloud your judgment.
Here are some of the most common (and dangerous) financial mistakes people make during a divorce:
1. Failure To Consider Real Costs.
Couples often make the mistake of only considering the current value of their investments without thinking of the real costs of liquidation. For example, selling off a property could result in capital gains taxes – a sizable tax obligation – or cashing out a retirement account can incur financial penalties. You should always calculate the real cost of splitting asset before making any decisions.
2. Taking Revenge.
Some divorcing couples make revenge against their spouse their number one goal, and purposefully hinder the divorce process by refusing to cooperate. In some cases, spouses may even actively work to undermine each other. Choosing to contest every issue during a divorce not only takes more time, it also costs a lot more in attorneys’ fees. There’s no need to break the bank to get a divorce – consider mediation as a more cost-effective alternative so that you are more financially stable after your divorce is completed.
3. Failing To Consider The Whole Picture.
Many couples only consider a few aspects of their divorce without looking at the big picture. Divorce isn’t just about who gets the house or the kids; it also means considering things like tax requirements, retirement planning considerations, and much more. For example, did you know that you and your ex-spouse can trade the child exemption on your tax returns in different years?
4. Holding On To Too Much House.
Change is difficult, especially when it comes to your home. A spouse may feel that they can handle their house payments, taxes, utilities, and upkeep on their own, but then quickly find out that the burden is too much to handle alone. The home can be sold, but as mentioned above, this may still come with a significant tax burden. You should discuss your options with your attorney.
5. Failing To Consider Insurance.
There are many different types of insurance that can affect your divorce settlement, including life insurance and health insurance. Not including these costs into your post-divorce budget can cause serious financial setbacks in the future.
If you are considering divorce, we invite you to schedule an appointment with a Washington divorce lawyer at McKinley Irvin. As the Pacific Northwest’s premier divorce and family law firm, we can help you better understand how divorce will affect your financial picture – now and in the long run. Fill out an online consultation form and we will be in touch with you promptly.