Financial mistakes that can cost you in a divorce proceeding

Topic: Divorce
Mar 31, 2021

Divorces are difficult to go through no matter what, but oftentimes – it’s the financial details that can be the most challenging. Today, we’re going to give you some tips on how to make the process easier and hopefully prevent certain problems from becoming substantial issues later on. 

Here are the mistakes you should try to avoid when negotiating the financial separation issues within your divorce proceedings. Let’s jump right in.

While you may be separating, you still have one common enemy. 

And that’s the IRS. Be sure that you work in tandem with your attorneys and accountants to minimize the impact of taxes that you and your spouse will pay during separation and divorce. Both spouses are liable for taxes due on returns, so it’s in both of your best interests to work together to make sure you don’t encounter any issues. 

Produce an accurate budget

Be sure to work with your attorneys to produce accurate budgets. You’d be amazed at how many couples miscalculate or underreport expenses during divorce proceedings and it can come back to bite you both; particularly when there are things like alimony involved. Be sure you’re working with financial professionals to produce accurate and complete budgets for you both. 

Getting emotional

Divorce is an emotional experience in general, so this is hard to do – but you have to be able to put a lid on your emotions when it comes to certain assets. People get attached to family homes they can’t afford. Sometimes they fight over retirement accounts, investment accounts and the like. This process isn’t about punishing the other side, it’s about coming to a conclusion that puts both of you in the best possible position to move on with the rest of your lives. That will require some give and get on both your parts. The main focus should always be to make sure you maximize your finances so that you’ll have enough cash for living expenses. 

Updating estate documents

Make sure that you update any and all estate documents you have. That includes beneficiaries on life insurance policies and wills. More often than not, we leave our spouses as beneficiaries and in the event the worst happens – if that’s what on the documents – it’s what’s on the documents. Make sure that as part of the divorce proceedings – that you have any and all estate documents changed and updated to reflect your current wishes. 

Insure your divorce settlement

If there are children involved in a divorce, there will be some sort of financial exchange in place within your divorce agreement. An ex-spouse’s premature death could be devastating and result in the loss of child support, assistance with college tuition, settlement payments and the like. Make sure that you insure your divorce settlement via a disability or life insurance policy. That will insure that these payments will still be made if there’s an unexpected loss or injury.

Divorce isn’t an easy thing to go through, but if you avoid some of these mistakes, the most difficult portion of the proceedings should go a lot smoother. Be sure to consult your attorneys and mediators and keep the communication going. The more thorough you are, the better off everyone will be. Good luck!