By Grant Zielinski, Divorce Financial Solutions
Divorce requires complete restructuring of your family and your finances. As you consider divorce, here are some financial mistakes you can avoid by getting professional input and making well-informed financial decisions.
- Failure to obtain professional input at the outset and consider divorce options such as Mediation. Often the most important decision in divorce is deciding on a process. Options such as Mediation (one neutral lawyer working jointly with both parties) often involve neutral specialists to help you make informed decisions, provide creative options that save you money, and help you avoid costly mistakes. Mediation can provide a more efficient use of your time and money.
- Discussing financial issues one at a time, rather than as part of the overall bigger picture. You increase the potential for conflict, and you may overlook creative options. In mediation, you can jointly explore options to create an agreement that works for the whole family.
- Looking only at now, not the long-term impact of financial settlement options. Ignoring how your settlement may look 5 or 10 years from now can leave you with future financial issues. Assets may seem equal in value at the time of divorce but may increase or decrease as time goes on. Understanding how your assets and income work for you now and in the future is an important part of the overall settlement.
- Not taking into account the tax implications of support, maintenance and property division agreements. You need to understand the effect taxes have on your agreement in terms of values and cashflow before you make final decisions.
- Not getting full financial information on all assets, including business/retirement accounts/pension values and options for division and distribution before reaching an agreement. You don’t know you have a problem until it’s too late. It is important to get accurate information about your assets and income before you make decisions.
- Failing to secure child support or spousal support with life insurance. The death of a payee spouse can have a significant effect on a family.
- Trying to retain a home you cannot afford.
- Not understanding potential liability for marital debts.
- Underestimating your future expenses, including allocation of children’s expenses.
- Overlooking a Qualified Domestic Relations Order to divide retirement benefits, transferring real estate and car titles, refinancing loans, and other implementation steps.
When you’re in the midst of a divorce, it is easy to get caught up in emotions and the desire to be done. Poorly informed financial decisions may cause problems long into the future—don’t just get it done, get it done right! Consult with a neutral professional at the Family Mediation Center to understand your options.
Grant G. Zielinski is a certified divorce financial analyst (CDFA) at Divorce Financial Solutions, LLC in Milwaukee, Wisconsin. Grant works as a neutral financial specialist in mediation and collaborative cases to educate clients on financial matters such as tax issues, maintenance, child support, and property division incident to divorce.