3 financial mistakes to steer clear of during divorce
Divorcing spouses should protect themselves financially by minimizing asset waste, budgeting accurately and seeking all available property and support.
Many people who are seeking divorces in Harrisburg appreciate the financial challenges that come with this process, which often results in direct legal costs and increased living expenses. Unfortunately, despite this awareness, many of these same people may be at risk for making common financial errors during divorce. The following missteps are especially common and critical for divorcing spouses to avoid.
1. Underestimating expenses
Many people may fail to accurately assess and plan for their post-divorce expenses, which can lead to financial distress after the separation is complete. Spouses should evaluate their necessary living costs and any discretionary spending that can be reduced, according to The Wall Street Journal. Spouses should also remember that many costs, such as rent and insurance premiums, might increase noticeably after the divorce is over.
It’s also imperative for spouses to appraise various divorce-related expenses. Besides tracking legal fees and costs, spouses should consider the long-term implications of different settlement options. For instance, many spouses may view keeping the family house as financially advantageous. However, spouses should evaluate the associated insurance, tax and maintenance costs to determine whether this is really the case. If an asset carries high hidden costs, spouses may want to reconsider pursuing it during the settlement process.
2. Forgetting marital property
Spouses who divorce in Pennsylvania are entitled to an equitable distribution of marital property, which consists of all property except gifts and inheritances that each spouse acquired while married. It is critical for spouses to ensure that all of this property is accurately accounted for when the settlement is determined. U.S. News recommends that spouses take the following steps to ensure that assets aren’t overlooked:
- Request copies of all bank, investment and retirement account statements to obtain accurate financial figures.
- Hire experts to valuate assets with questionable or unclear worth, such as a personally held business or a set of collectibles.
- Work with a forensic accountant to check whether the other spouse may be attempting to hide assets.
Since property division typically can’t be modified after a divorce decree is finalized, it’s important for spouses to avoid forgetting any assets. Similarly, spouses should consider pursuing any spousal support or alimony that they may be eligible to receive, since requesting such support after the divorce is over can typically be difficult.
3. Depleting shared assets
The Wall Street Journal notes that spouses should also be careful to avoid needlessly dissipating marital assets. In contentious divorces, some spouses may deliberately waste assets to reduce what the other spouse receives. Other people may engage in costly and drawn out litigation in an attempt to obtain a more financially favorable settlement. Unfortunately, both of these approaches can reduce the total amount of assets that are left for the spouses to divide.
Avoiding common mistakes
To avoid these missteps and other common financial blunders, divorcing spouses may want to consider partnering with an attorney during this difficult time. An attorney may be able to help a spouse understand his or her rights and avoid unnecessary missteps during the divorce process.