The following are the ten biggest divorce financial errors to avoid during settlement negotiations. Consult with a financial divorce specialist to protect yourself and your children financially.
1 – Emotional Attachment to Assets
It is natural to have an emotional attachment to a company pension, family home, or artwork purchased over the years while you were married. You feel bound to them, impairing sound judgment, and divorcing couples often bicker for long periods over their ownership. Although you cannot afford the mortgage, property taxes, maintenance, repairs, and utilities, you are still desperately fighting for the vacation condominium you bought with your spouse. It would be wiser to ensure adequate cash reserves to cover day-to-day living expenses after a divorce and during retirement.
2 – Estate Documents Weren’t Updated
In the wake of a painful divorce, many people neglect to revise the beneficiaries listed on their will, IRA, or life insurance policy. As a result, an estate intended for children, new life partner, or beloved charity may be inherited by the ex-spouse instead. It is advisable to discuss updating your estate documents and revising your estate plan with a family law attorney to make the necessary changes in a timely manner.
3 – Inadequate Settlement Insurance
If your ex-spouse dies or becomes disabled prematurely, you can be harmed financially by the loss of child support, alimony, child support, property payments, or college tuition. These divorce settlement payments can be protected by life and disability insurance policies.
4 – Miscalculating Settlement Proposals
When you are reviewing a spouse’s divorce settlement proposal for fairness, you should calculate how the agreement would affect your finances in the future. A financial divorce advisor can help you evaluate numerous factors, such as incomes, living expenses, health & life insurance, assets, alimony, investments, child support, inflation, taxes, retirement plans, medical costs, and educational costs for children.
5 – No Post-Divorce Financial Plan
There will be lifestyle compromises for the ex-spouses and their children after a divorce. Two households will be more expensive to run than one. A divorce settlement will likely affect the rest of their lives, so divorcing spouses must rely on sound financial planning in order to make the successful transition to single lifestyles.
Part 2 will cover the second 5 of 10 biggest divorce financial errors.
Professional Guidance for Divorcing Individuals
John Faggio, CPA, CFP®, CDFA™, is a Financial Divorce Specialist. Faggio Financial helps divorcing individuals reach an equitable financial settlement in a professional, cost-effective, and expedient manner. Call (410)988-7333 for professional guidance today.