Apart from the emotional turmoil that a divorce can cause, it can also have a big financial impact on both of the spouses; but failure can usually be easily avoided. One of the biggest concerns in regards to divorce and finances is the settlement agreement that is made between the divorcing spouses. It may feel like the easiest thing to just sign any paper that is given so that you can be over and done with it, but it is strongly advised that carefully review the settlement agreement so that you are aware of what you and the other spouse are receiving. The following are failures you can avoid in negotiating your divorce settlement agreement.
Failure to consider your long-term financial security
If you focus only on the immediate task of splitting assets and getting alimony and child support, without understanding how things might look in 10 or 20 years, you might be hurting yourself in the long run. It is advisable to hire someone with experience to go over any proposed settlement agreements to ensure that it is what is best for you.
Failing to develop a solid financial plan for after the divorce
One well known fact of divorce is that is costs more to maintain two households. Many divorcing spouses fail to realize that their divorce settlement must last a significant amount of time, possibly even the rest of their lives. It is recommended to start financial planning to help the transition from a married to single lifestyle by prioritizing financial goals, developing realistic expectations, and producing sound plans for the assignment and division of financial resources.
Failing to insure the divorce settlement
Your ex-spouse’s premature death or disability can be devastating and may result in a loss of alimony, child support, college tuition, or property settlement payments. Life and disability insurance policies can guarantee that these payments will continue despite an unexpected loss or injury. It is important to make sure their is life insurance to guarantee alimony and/or child support obligations in the event of either party’s death.
Failing to update your will, estate planning documents and beneficiary accounts
After divorce, many people forget to change the beneficiaries on their life insurance policies, IRAs, and wills, so the estates they wanted to leave to their children or new spouse may go instead to their ex-spouse. If you’re going through a divorce, it is important to find out what changes you should make to your estate plan during or after your divorce.
Failure to make and stick to an accurate budget
Divorcing spouses usually underestimate living expenses when they produce their initial budget for temporary alimony, and later find that they aren’t able to cover all of their bills. It is recommended to either hire a professional or at least make a concerted serious attempt yourself. Always remember, the important thing is that you will need to develop a budget that will serve you for years to come.
Failure to reject unreasonable settlement terms
Both spouses and children must make compromises in their life styles after the divorce. A settlement that does not give one spouse enough money to live on is likely to go into default in the future. Be fair, but verify the numbers. Get payments up front whenever possible, even if you get less in total. Try to secure all payments with assets and insurance. On the other hand, agreeing to pay more than you can actually afford in alimony or child support will only cause significant problems in the future – and may even lead to accusations of contempt.
Failure to understand how asset division works in divorce
Be sure you understand that an asset’s value is not necessarily defined by or limited to its current market value. For example, assets that generate income like rental property may be worth more than their market value. Agreeing that each spouse will receive property of equal monetary value doesn’t always mean each spouse will receive a truly equal share of the assets over time. It is important to speak with an attorney to help gather an understanding of the nuances of how the courts view assets in divorce cases.
If you are facing a divorce, call us at 770-609-1247 to discuss how we can assist you as we have for others.
