Going through a divorce can be stressful but you need to be in a position to make some sound financial decisions throughout the process.
There are several things you can do to avoid being a financial victim after divorce, including getting help from a financial planner or other professionals to keep yourself on the right track.
In a previous article on AskTheMoneyCoach.com, I shared seven financial mistakes to avoid during a divorce.
Here are seven more financial mistakes to avoid during a divorce:
1. Hiring a lawyer to punish your spouse.
A divorce can be emotionally stressful and it may be tempting to hire a lawyer who is more aggressive in nature and will try and punish your spouse financially.
However, this can be a costly venture and the courts will need more than proof of emotional hardship to support their decision.
Keep things professional and less personal so that you can reach a fair settlement agreement.
2. Overlooking taxes.
When substantial assets are involved, consider hiring a divorce financial planner to work through the tax ramifications of the divorce.
Both spouses are responsible for paying taxes on audits from joint returns and you will need to minimize your tax liability whenever possible.
You will also need to make sure you’re receiving a fair deal on any taxable investments and other taxable assets. A divorce financial planner can help with this process.
3. Being too attached to assets.
Many material items that must be sold during the divorce or granted to either spouse can cause emotional stress.
Whether it’s the home you purchased together, a car, or household furniture, you need to proceed with the divorce without being too attached to material goods and assets.
Remember also that assets you may insist upon getting now – like the house – could wind up being a financial drag for your later.
So don’t be so set in stone about some so-called “assets” that are also “liabilities” because they require monthly, ongoing costs or upkeep.
4. Ignoring social security benefits.
If you were married for more than 10 years, the lower-earning or non-working spouse is entitled to something called derivative social security benefits from the other spouse’s work record.
Talk to a divorce financial planner to determine what social security benefits you may be able to claim after divorce.
5. Forgetting about estate documents.
Estate planning can be an easy area to overlook when you separate from a spouse, but it’s essential that you take the time to change beneficiaries on your life insurance policies, update your will, and review your IRAs.
You’ll likely want to make sure that your estate is left to your children, a relative, or even your favorite charity – as opposed to your ex.
6. Not having a financial plan after the divorce.
You can set yourself back financially if you don’t have a realistic plan to manage your new expenses and handle your budget after divorce.
Make sure you’re revising your budget and prioritizing your financial goals and investments.
You won’t get stuck in debt after a divorce or put yourself on the path to bankruptcy if you plan ahead.
7. Not maintaining records of financial documents.
Keep track of all financial documents and create a folder or filing system for all statements and other financial records as soon as you learn you are getting a divorce.
You need this information for your divorce lawyer.
Updated financial records will also help you track funds and assets.
Although you may not be able to completely prevent your soon-to-be-former spouse from liquidating financial assets without your consent, taking money from joint accounts, or moving other assets without your knowledge before you reach a settlement; if you can demonstrate that any of these things happened, a judge may order your ex to return certain assets.