Often, reading a divorce settlement makes more financial sense than going to trial. This gives you more control over your divorce’s outcome and shortens the divorce process. Thus, no extensive trial preparation is necessary. However, while reaching a divorce agreement is good, making some settlement mistakes can eliminate the financial benefit associated with it. Below you will learn the common financial mistakes couples make in divorce settlement and learn how to avoid them.
Not Setting Up an Accurate Budget
Although budgeting can be exhausting and boring, it can help you reach a fair divorce settlement. You must have an accurate picture of your current and post-divorce income and expenses to know if a settlement is right for you. Don’t make assumptions regarding your living expenses following your divorce. Otherwise, it will be too late to modify the settlement to meet your actual needs. If you negotiate a divorce settlement with a realistic budget, you will know what exactly you need.
Not Getting Asset Appraisals
Does your spouse mainly deal with marital assets such as the marital home and business assets, you may just take whatever they think they are worth. Because appraisals are expensive, you agree on an asset’s value. However, this might cost you thousands of dollars in your divorce. While you may need to pay a valuation expert’s fee, it will be quite reasonable when you know exactly how much an asset is worth.
Not Paying Attention to Tax Implications
Some assets carry tax benefits like the possibility of claiming a deduction. Others may create tax burdens. Your divorce can impact your taxes in many ways, so you need to consult with your lawyer and accountant regarding the possible tax ramifications of a divorce settlement before you sign it. Also, keep in mind that tax laws tend to change regularly, so what might work once may not work again.
Not Considering Inflation
If your divorce settlement includes a promise to make a payment in the future, you must consider its cost when this payment comes. For instance, let’s say you agree to pay the future college tuition of your children. While your income may grow by this distant date, tuition rates may grow even faster.
Divorce is often stressful and overwhelming and you may not be able to control your emotions. Thankfully, you can rely on a skilled divorce lawyer to keep you on the right path, so you can avoid making financial mistakes in divorce and maximize your settlement.
