Divorce is a time that’s rife with emotional pain. In order to come through financially and emotionally in one piece, focus on your goals, where you’re going (not where you’re at) and what it will take to get you there. Arm yourself now with knowledge of major pitfalls that you want to avoid like the plague.
- Don’t assume you need an attorney.
If your estate is simple, and the divorce isn’t hostile, use a mediator instead of a lawyer. Attorney fees can pile up fast. Attorney fees can turn what began as a simple divorce into one that is plagued with hostility.
- Don’t forget to account for alimony and child support taxes.
Child and spousal support can help, but they are treated differently come tax season. If you provide child support, you cannot write it off on your taxes, giving your ex tax-free income. If you provide spousal support, however, you can write it off. Your ex has to pay taxes on it.
- Don’t forget to account for real estate tax.
Many couples own their homes jointly, and deduct the mortgage interest jointly. By not considering the value of this deduction, you could lose it–and end up with a bigger tax bill. The spouse who keeps the house and the mortgage will also get a hefty tax deduction. They can also deduct the amount paid in real estate taxes. But, if the house is sold, both deductions are lost. Don’t give these deductions away if you can help it.
- Do not hide assets.
Some people will go to great lengths to make it seem as if they have fewer resources than they really do in order to keep money for themselves. This is unethical and it is against the law. If the judge finds out, the guilty party will face serious penalties. Should your spouse get away with this, you will lose assets and monies that you are entitled to under the law.0
- Don’t neglect to properly value your assets.
“Winning” the house can feel like a victory, unless that home is burdened with a mortgage that you cannot afford, hefty utility bills or if it is worth less than the mortgage. Likewise, a car with high payments or that requires expensive maintenance could be more of a burden than a gain. Divorce is about splitting assets fairly and equitably. If something that seems like an asset is really a liability, it’s just not worth it, and it could force you into debt, damaging your financial security for years. Conversely, if your spouse has a business that isn’t properly valued, you could end up walking away from an asset that should be rightfully yours.
- Don’t fail to update your beneficiary information.
Be sure to update the beneficiary information on wills, retirement accounts, brokerage accounts, and pensions as well as insurance policies. Even if you go on to remarry, your ex-spouse will still be entitled to any retirement or insurance money should she or he remain listed as a beneficiary.
Divorce can be overwhelming. The stress, shock and feelings of betrayal can make it difficult to think clearly. But, if you can just manage to avoid these six common divorce foibles, and you will have gone a long way towards starting anew gracefully.