Top 3 Avoidable Divorce Settlement Mistakes
The cold hard truth- your household income will now need to support TWO households. Don’t fool yourself that nothing will change. Here are some tips to navigating around common pitfalls, or mistakes that occur quite regularly. Too many people have approached me confused after the divorce settlement is signed, sealed and delivered. I don’t wish this for you!
1. Do not overlook taxes! It is crucial that you understand the tax implications of your divorce settlement. Your division of assets may show a 50/50 split before factoring in taxes but could look drastically different after taxes. Don’t let this be a surprise and understand what the division means to you after taxes. Work with a CDFA™ to assist you in illustrating this so you may make an educated decision.
2. Are you splitting a Pension 50/50 and do you know what this means? Do not use overgeneralized instructions without understanding the implication or considering various pitfalls. What age will the pension begin? What if your spouse passes away? Is there a cost of living increase each year (COLA)?
3. Keeping the home that you cannot afford - Natural, natural, natural to want to stay in your marital family home. But can you afford it? Is this really what’s best for you, and maybe even your children? I’ve worked with too many clients who (with good intentions) kept the marital home. AND, they run out of money within a few years as there are not enough assets to support the home and maintenance costs. Don’t let this happen to you- it’s so stressful. Meet with a financial planner, a CFP, to determine a budget and whether or not you can afford to keep the home. Keep an open mind to down-sizing and recreating a new space (decorated how YOU want) for yourself, and your children. This can be fun! But make an educated decision, know the implications and take care of yourself. Don’t pigeon hole yourself where you monetarily lose from an emotionally based decision.
As we say at Ezharmony, LLC- you have one shot to get this right! Make smart decisions and recognize there are things you don’t even realize you don’t know, implications you could never dream up.
