12 Financial Mistakes to Avoid During Divorce
When a marriage breaks up and divorce is on the horizon, it can be difficult to strategize and stay on track, especially when it comes to finances. Oftentimes, financial mistakes made during your divorce, make a bad experience, even worse. Avoid financial mistakes during your divorce with these 12 tips from one of Tampa’s top family law firms.
1. Not Taking Divorce Mediation Seriously
In some states, attending divorce mediation is not required, and couples can skip straight to trial. However, Florida courts require that spouses who file for divorce attend mediation before they can proceed with going to trial. It is important to take mediation seriously. Use your best efforts to come to an agreement at mediation, if possible. By mediating all of your issues, all or even part, you can save yourself the trouble and expenses that are often associated with trial; such as, expert fees, additional hours worked by attorneys for trial preparation, additional discovery and more.
2. Not Getting Insurance
We never anticipate something terrible happening to a former spouse. However, it certainly can happen, and if it doesn’t, you need to be prepared financially. If you are entitled to alimony, or other support payments, consider requiring your former spouse to get a life insurance policy, for your benefit. This would allow you to continue to receive support, even if something were to happen to him or her.
3. Hiding Assets
Just don’t do it. Not only is this extremely immoral and punishable by the courts, but the truth will come out. When people attempt to hide assets, it becomes clear very early on that numbers don’t add up. This will add more work, and thus more attorney’s fees on both sides. Be transparent from the start, and you will save yourself money down the road.
4. Going on a Spending Spree
If you are considering filing for divorce, please understand, this is not the time to go on a spending spree. This also is not a good time to try to withdraw funds from marital bank accounts “just in case.” The court will look back two years for intentional overspending or dissipation of assets by both spouses.
Additionally, once you file for divorce, any debt accumulated after is likely going to be considered non-marital debt, to which you will be 100% personally liable for. The court can hold parties accountable for any dissipation of assets.
5. Being Irrational About Sentimental Assets
Be realistic about what assets you will be able to keep and afford after your divorce. You may love the boat you bought during your marriage. However, you may not be able to pay for the loan, storage, maintenance, etc., when the divorce is over with. Do not go fighting tooth and nail over an asset that you want, without thinking everything through. This includes your ability to upkeep and afford it after the divorce is over.
6. Ignoring Tax Implications
There are a ton of tax implications to take into consideration when you are going through divorce. This is a complicated area, and will often require outside help. Family law attorneys do not specialize in tax law, so you will want to consult with a tax expert in your divorce. It is important to know ahead of time on how much to plan to save aside for taxes. This includes any tax liability you may be responsible for from assets received after settling. Just because you may split assets 50/50 doesn’t mean you aren’t going to suffer costs associated with those assets.
7. Avoid Treating Your Lawyer as a One-Stop Shop
Lawyers have seen it all, and often are called counselors, but do yourself a favor and do not make them your mental health counselor. It is okay to go to them from time to time with issues, but with many attorneys charging $200-$400 per hour, you are better saving your emotional struggles with a mental health counselor who will charge a fraction of that fee.
8. Hiring a Combative Attorney
In very few cases is there going to be a need for a combative attorney. Hiring a combative attorney to go after your spouse for every little thing is going to rack up fees. And remember, the higher the amount of fees, the fewer assets there will be available for distribution. Although it may feel like what is fair, it likely will have a negative impact on everyone in the end.
9. Not Setting a Budget or Not Knowing Your Spending Habits
Before going through a divorce, or while going through a divorce, it is important to know how much you spend- and be realistic about it. This way, when you go into mediation, you know exactly how much you need. In addition, knowing what your monthly budget is can help you plan what assets are worth keeping if you can afford to continue to live in your marital home, drive your marital car, and so on. It is rare that a person is able to maintain the same level of living post-divorce as they did during the marriage, but the courts will do their best at maintaining the status quo as much as possible.
10. Not Sorting Through Your Financial Documents First
Although this may seem like a daunting task, it is well worth it to organize your financial documents first. This is much more cost-efficient than having your attorney do it. Your attorney or their paralegal will bill for organizing and analyzing documents. This will come at a hefty cost when there is extensive discovery. Label your documents, organize them into folders, download them to a thumb drive. This may take a couple of hours, but it can lower costs significantly.
11. Being Unrealistic About Legal Fees
Although utilizing paralegals is a great way to save costs when going through a divorce, that can only go so far. You should not anticipate that they will handle all or the majority of your case. Paralegals typically handle a lot of the standard filings in divorce cases. There are a lot of instances when an attorney has to handle aspects of a case. Therefore, you need to be realistic about how much you are going to need to set aside for attorney’s fees.
12. Forgetting About Marital Debt Liability
So perhaps your spouse took out a huge loan during your marriage for that boat he really wanted. That is going to be marital debt, and you are going to be liable for it. Or perhaps you paid for your spouse’s tuition so they could go back to school. That is also going to be a marital debt. When it comes to divorce, title is not determinative. So be cautious that just because a debt is in your spouse’s name, it does not remove personal liability for you. You are likely going to be responsible for half of the marital debts, even if you do not benefit from them. Plan for payment of debts.
Do you need to talk to a divorce attorney? Call us. We’ll help you with your divorce case, and ensure you are set up for success post-divorce.