Most Common Financial Mistakes Made During Divorce
On behalf of Eisenmenger, Robinson & Peters, P.A. posted in Family Law on Tuesday, February 07, 2023.
Financial mistakes can happen at any time, especially at the end of a marriage. It’s clear, emotionally, why it’s so difficult. But why is it so expensive?
The average cost of a divorce is $12,900. It ranges from $4,100 for an uncontested divorce to $23,000 for divorces that involve child support and custody agreements.
If there are two parties that also have never-ending custody issues, you can count on thousands upon thousands of dollars every time a new motion is made.
Kindly scroll below and see how to avoid the most common financial mistakes made with a divorce.
Financial Mistake #1: Problems Dividing Assets
Dividing marital assets is one of the most difficult parts of a divorce. It’s also one of the most common areas where couples make mistakes.
Don’t hide or drain your assets. If you think your spouse is, check for:
- Inconsistencies on recent tax returns
- Bank accounts with large expenditures
- Brokerage statements that show them buying and selling stocks and bonds
You and your spouse should get an independent valuation of each of your major assets. A mediator, arbitrator, or judge can look at both valuations to determine a fair agreement.
Financial Mistake #2: Child Support and Custody
Most parents only consider regular expenses when agreeing on child support, but this is one of the more common financial mistakes in divorce. You’ll also need to consider future expenses such as:
- Medical expenses
- Health insurance premiums
- Extracurricular activities
- Life insurance
A divorce can even change how much financial aid children get for college. Certain schools may expect contributions from both parties. You’ll also need to decide who will claim the child’s tax credit each year and deal with advance child tax credit payments and shared custody. Don’t make the mistake of not adjusting the terms if your financial situation changes.
Financial Mistake #3: Tax Issues
Divorce has several tax implications beyond the fact that your filing status will change.
Dividing or selling assets can leave you with unnecessary capital gains and gift taxes unless you have the right timing and documentation. You’ll also have future liability on your marital assets that could become a major issue come tax time.
Marital assets can also leave you with capital gains and losses. These occur when you sell an asset for more or less than you paid for it and apply to :
- Real estate
Missing obvious tax liabilities is a big financial mistake. These tax changes can become a drain, so be aware of whether or not you’ll be slapped with them.
Financial Mistake #4: Doing It Yourself
Not choosing the right lawyer is an easy way to waste time and money. This is true regardless of what type of arrangement you settle on.
A pro-se divorce involves printing all the necessary forms on your own and bringing them to the courthouse. This is a dangerous choice because neither you nor your spouse are legal experts. It’s easy to fill them out incorrectly and lose benefits, gain debt, or ruin child support agreements.
A contested divorce is one where you have to go to court to reach an agreement. Trying to do this yourself or failing to hire a qualified lawyer makes it take more time and money.
Where to Get Help With Family Financial Mistakes
Financial mistakes are common during emotional periods such as divorce. The best way to avoid them is to be prepared and have a qualified legal team.
Be careful when dividing assets. Think long-term with child support and custody agreements. Divorce also comes with tax implications you need to be aware of.
Many spouses try to handle the entire process themselves. This is the most dangerous mistake because it can lead to several other legal and financial issues.
Even though your current circumstances are uncomfortable or frustrating, your future doesn’t have to be. Our family law team will help you get it done right. Contact us today.