J. Benjamin Stevens in his South Carolina Family Law Blog highlights some of the biggest financial mistakes divorcing couples can make. I have taken the liberty of reproducing it here:
Divorces can be complicated and messy, both from a personal and a financial standpoint. Forbes published an article a couple of years ago which listed financial mistakes that everyone should try to avoid. Here is their list, with my comments about each point listed afterward:
- Having unrealistic expectations. Parties often forget that their living expenses typically double when they separate. The same income(s) now must support not one, but two households, and it is not uncommon for things to get tight for a period of time.
- Not communicating. It is extremely important that clients give their attorney all of the necessary information about their case, and not didn’t seem that important can result in disastrous consequences for the clients if their attorney is blindsided with them at trial.
- Getting into an endless battle. Some divorcing spouses fight in Court because they want to fight. Either they can’t get past their own emotional hurt from the divorce itself, they want to make their spouse’s life miserable, or they just enjoy turmoil, stress, and fighting. Parties would be well served to fight only those issues which truly need to be fought and act reasonably throughout the process.
- Getting hung up on the numbers. It is important for the marital estate to be divided fairly between the parties, which generally means an approximately equal distribution. However, there will always be some assets which would be better going to one spouse than the other, and in some cases it makes sense to use a different distribution to accomplish other necessary goals. For instance, one spouse may benefit from taking less of the marital estate in exchange for a larger amount of spousal support (alimony).
- Focusing on the present and not on the future. The financial issues in a divorce affect both parties long after the divorce is over. Parties should realize that when they are attempting to get as much as they can by way of assets that there are often debts and other expenses that accompany them. It makes no sense to fight to get something that you truly can’t afford to keep in the long run.
- Forgetting to assess tax. Many issues in divorce cases have tax consequences, and many of those do not show up until after the fact. Examples can include alimony payments, dependency exemptions, and capital gains issues. Parties are well served by having an accountant available to discuss these issues before it’s too late.
- Overlooking important . It is important to make sure that everything in your divorce case is addressed and thoroughly analyzed by your attorney. For instance, are you sure that your spouse doesn’t have a retirement account with his employer and/or are you sure that the balance is what he/she says it is? Let your attorney obtain the necessary information directly from the source to verify it authenticity and accuracy.
- Failing to untangle all joint finances. The sooner you can separate yourself financially from your spouse, the better off you will typically be. If your spouse fails to make a timely payment on a joint debt, that stain can show up on your credit report. Likewise, you may still be liable to the lender if your name is on that account and your spouse doesn’t pay.
- Failing to take into account the amount of time you’ll to get your career back on track. In many marriages, one (or both) spouses have made career sacrifices — either for each other or for their children. In these situations, it takes time for that spouse to be in a position to earn an income comparable to the other spouse, if ever. Keep this in mind when you are going through a divorce, because in most cases, the parties do not have an equally financial standing at the outset.
In the end, both parties have to reasonable. Failing that, you will be enriching your attorney.
