Divorces are often emotionally-charged, making it hard to be objective when faced with decisions. As such, many individuals arrive at settlements that affect their financial security. In this article, we’ll discuss top financial mistakes to avoid in a divorce.
Rather than dealing with these issues yourself, you should consult divorce lawyers in Delaware County, PA, for guidance.
Not Knowing Your Marital Finances
If you’re currently in the dark about your household finances, now is the time to start getting familiar with them. Perhaps your spouse has always managed the budget, and you were not involved. If so, your spouse may have an unfair edge over you when it’s time to reconcile the financials.
You should carefully review all financial records relating to income and expenses. Check all accounts (savings, retirement, brokerage, etc.), card statements, tax returns, and make copies of important documents. Also, find out about assets and inform the courts if your spouse is trying to move, hide, or liquidate them.
Similarly, ensure to check for marital debts and consider paying them off before the divorce is final. The reason is that creditors don’t honor divorce agreements. If your ex is supposed to pay the debt after the divorce but doesn’t, the collection agencies can come after you for payment.
Negotiating Too Early
Negotiating and agreeing to the terms of your divorce with your spouse can save you from a lengthy divorce trial. However, don’t be tempted to dissolve your union quickly by negotiating without fully understanding the financial picture. The chances are that you may end up with an agreement that’s unsatisfactory in the long run.
For instance, if you’re entitled to alimony, you need to calculate your monthly expenses. Then develop a realistic budget that’s in line with your standard of living while accounting for future living costs, inflation, and insurance. With this budget, you can have a baseline for calculating alimony.
Therefore, if you don’t want to be short-changed, take out time to understand your finances before negotiating.
Not considering the Long-term Implications of Settlements
While a settlement may seem fair, it’s wise to be realistic and analyze its long-term implications before consenting to the terms. For instance, many people have an emotional attachment to their family homes and will even fight to keep it. However, it doesn’t make financial sense to keep the house when you can’t afford the mortgage, taxes, utilities, and maintenance cost.
Thankfully, divorce lawyers in Delaware County PA, can guide you in deciding whether to give up or keep an asset.
Ignoring Tax Implications
Ending your marriage changes your tax situation. By the end of the year, you’ll need to file as a single person or head of household. You and your ex will also need to decide who’ll claim the kids as dependents when filing taxes.
Furthermore, you’ll need to consider the tax implications on alimony and assets. Both the recipient spouse and the spouse paying alimony are liable to taxes on spousal support. Then, cashing out on the assets you’ll get, such as withdrawing from retirement funds or selling a property, may incur tax liabilities.
Not Having a Financial Plan
It’s easy to think of a post-divorce financial plan. However, only a few people consider having cash aside to sustain them through the divorce process. The time between separation and finalizing a divorce may take several months, and it can lead to a state of financial uncertainty.
Therefore, it’s essential to start saving now for a rainy day.
Are you considering a divorce? Learn more about how to make the best financial decisions from divorce lawyers in Delaware County, PA.