Don’t Make These Five Financial Mistakes in Your Divorce
The divorce process is already time-consuming. You don’t want it to take up most of your finances as well. The decisions that you make during your divorce will impact your financial security for years to come. That’s why you want to avoid as many financial mistakes as possible.
Here are five financial mistakes that you don’t want to make during your divorce from the Columbia divorce attorneys at McCabe Russell, PA.
Underestimating your expenses
Now that you are separating from your spouse, you’ll need to reconsider your cost of living. Many folks don’t accurately calculate their monthly expenses. There may be many changes to your lifestyle that will increase your expenses, especially child custody arrangements.
There are a lot of free budget tools online that you can use to help you track things like:
- Rent/mortgage payments (and potential HOA fees, if applicable)
- Utility payments
- Cell phone bills
- Educational costs (including tuition as well as after-school clubs or sports)
- Car and health insurance payments
- Car maintenance and gas
Keeping this running tally has two benefits: not only will you see what you have, but you will also see patterns emerge in where you are spending your money. This can help you make any necessary adjustments you need, especially since alimony is not guaranteed.
Assuming that property division will be fair, but not necessarily equal
Another common mistake is underestimating an asset’s value. Many spouses assume that their property will be divided 50/50. That’s not always the case. The value of an asset will not remain the same. Some assets may be worth more than their market value at the time of your divorce; some may be worth less.
When determining the value of a marital asset, don’t just assume that you’ll receive your equal share of the asset. You want to make sure that the value you receive is proportionate to its present value.
Failing to consider taxes in the divorce process
After you and your spouse separate, you may still be taxed on your joint assets. Even if you agreed to a settlement, you may still be taxed on your marital assets. To reduce the amount that the both of you would have to pay, it would be in your best interest to work together.
If you can, work with your spouse to create a practical plan for your taxes. If you need additional help, speak with a divorce lawyer and an accountant. If the relationship between you and your spouse is confrontational, you may still want to speak with an experienced divorce lawyer. If the two of you plan on splitting investments, you want to find out what the value of the investments will be after taxes.
You also want to make sure that they are being taxed fairly. Working with a divorce lawyer and an accountant will resolve any confusion about your taxes post-divorce.
Not considering other sources to cover alimony and child support payments
One of the biggest assumptions about alimony and child support payments are that they come from the other spouse’s income. While that is true, there are other ways that these payments can be covered. A spouse can use life insurance and disability insurance policies to continue to pay for these payments.
This information should be considered during the divorce process, particularly if your spouse argues that they won’t be able to make the payments. However, this option will not help if your spouse refuses to make these payments. In that case, you would have to issue a court order.
Failing to understand liability for marital debts
Another mistake that many spouses make is assuming that once the marriage is over, so is the liability with their spouse’s debt. In reality, you may still be held responsible for your spouse’s debts. Your debts are just like your assets.
If the debts were collected during the divorce, they will be separated just like your marital assets. Depending on the type of debt incurred, collectors may come after you for the payments.
If possible, you and your spouse may want to come up with a plan to tackle all debts before the divorce is final. A divorce lawyer can help the two of you design a plan that helps eliminate your debts.
How a Columbia divorce lawyer can help you protect your finances
This may be the first time that you’ve been through the divorce process. With so many decisions to consider, it’s so easy to make a costly financial mistake. That’s why you need an experienced divorce lawyer on your side. A divorce lawyer is used to the various financial mistakes that spouses make. They can use their expertise to protect your rights, regardless of what direction your divorce takes.
Your divorce lawyer can explain your rights to you and make sure that you understand them. They can assess your assets and debts and determine what is marital property or separate property. They can even show you what documentation to use to prove that each property is marital or separate.
Assist with equal distribution
Working with a divorce lawyer may also increase your chances of receiving a fair distribution of your assets. When it comes to equal distribution of property, there are so many factors to consider. Your divorce lawyer can assess each of your marital properties and make sure they are distributed fairly between the two of you. Your attorney can also offer advice that prevents you from being held responsible for your spouse’s debts.
Locating hidden assets
At times, the divorce process can get ugly. You may suspect that your spouse is withholding certain assets from you. Working with a divorce lawyer can help you discover any hidden assets that your spouse has. You want to make sure that all marital assets are distributed fairly and that you’re not cheated out of something that you’re entitled to.
To give yourself the peace of mind you deserve, speak with a caring Columbia divorce lawyer today from McCabe Russell, PA. We maintain additional offices in Fulton, Bethesda, and Rockville and represent clients throughout the state. Call our office or submit our contact form to schedule an appointment today.
Heather is the firm’s managing partner and divorce law guru. Heather knows all the ins and outs of divorce in Maryland and DC, and she knows exactly what to do to put her clients in a position to accomplish their goals.
Find out more about Heather McCabe