As you exchanged marriage vows on your wedding day, you would never have thought that it would end this way. You are in the middle of a divorce and feel hurt and kind of lost. Now that you are about to begin a new chapter of your life, all your plans for the future will have to be redrawn and rewritten. With things changing all around you it’s easy to feel disheartened.
Divorces are emotionally daunting, but you need to make sure that you don’t let emotions prevent you from moving on with the rest of your life. If there ever was a time you needed to be more focused about your personal finances it’s right now. This could impact your and, perhaps more importantly, your children’s financial future.
So don’t throw in the towel just to get the divorce over and done with. Instead brace yourself. The following points highlight five common mistakes women make during a divorce; understanding this information could enhance your current, as well as future financial security:
Failing to understand the differences between marital and separate property
As a general rule any property acquired during your marriage qualifies as marital property. This includes gifts exchanged between you and your husband for anniversaries, birthdays, etc. Another thing that you need to know is that it’s irrelevant who the actual owner of the property is – as far as the law is concerned it belongs to both of you. Your property, separate from marital property, is generally anything that you owned before getting married. It can also include inheritance and gifts you received from people other than your husband, and any compensatory damages that you were awarded. The law is not exactly straight-forward on this matter, and it’s in your best interest to contact a family law attorney or a divorce financial planner to explore your options.
It’s not uncommon among divorcing women to forget or not be aware of all assets like 401(k)s, IRAs, pensions, stock options, life insurance, deferred compensation, annuities, time shares, tax refunds, membership to country clubs and perks like accrued leave and vacation time. You must include these during the divorce settlement or proceedings.
Believing a 50/50 split is the rule
Many women act under the mistaken belief that an equitable division of property means the property has to be divided equally between them and their husbands. A number of factors such as the state you live in, the duration for which you were married, and present income and earning capacity in the future could be factored in while property is divided. Based on elaborate calculations involving these parameters you may receive more than 50 percent or less. There’s a difference between an equitable and equal split, and you need to be aware of this.
Not analyzing the impact that your divorce-settlement options will have on your financial security in the future
A divorce decree, once signed, can be difficult (and expensive) to change. It’s in your best interest to invest the time and energy to arrive at a divorce settlement you can live with. Long-term tax and other financial implications are often overlooked in divorce settlements. What may appear reasonable today could seem unfair and prove ruinous for you a few years from now. You will need to sit down with an experienced financial strategist to thoroughly examine your various divorce-settlement options.
Failing to secure property settlement, child support and alimony through life insurance
Alimony payments and child support may get affected if your ex-husband were to die or have a meaningful change in employment. While spousal support payments will typically cease in the event of death, child support may be provided through your ex-husband’s estate. By obtaining and owning a life-insurance policy on his life, you will be able to save yourself from the potentially devastating financial effects of his death. Seeking guidance from a professional divorce financial planner prior to your divorce can help you set your personal finances in order.
Avoiding thinking about the future
While there is no way to know when or exactly how your divorce will resolve, one thing is sure: Your life will be very different than it was in the past, notes Miller. “At the beginning of the case, you need to start thinking about where you will live and what you can afford,” she says. “Many women want to stay in the marital home, but it’s wise to weigh how much that will cost versus other alternatives. Also, if you aren’t currently working outside the home, that is another consideration, because alimony and child support is rarely enough to completely support you and your children.”
Postponing consulting with an attorney
Meeting with an attorney or attorneys to get advice prior to a divorce filing is a step that many women hesitate to make, because they aren’t emotionally ready and aren’t willing to share that information with their husband. However, informing yourself about your situation, your rights and what financial support you can expect should you or your husband decide to file for divorce is a proactive step that is in your own best interests, says Rachel Miller, also of Richardson Bloom & Lines. “You can gain valuable information that will help you make the best decision for you and your children when you take time to meet with an experienced family law attorney prior to a divorce filing,” she says. “However, beware of searching for information and advice on the internet as there is a lot of misinformation and wrong information out there.”