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.