If you're headed for divorce, more than likely you've never done this before. Considering the fact that divorce is a huge financial transaction, sometimes one mistake can lead to a lifetime of regret.
With that in mind, here we're offering you tips on how to avoid some of the most common financial mistakes in divorce.
Becoming a victim of the divorce.
If you suspect that your marriage is headed for divorce, don't take a backseat. Get to work making copies of all of the financial documents such as account statements, mortgage documents, tax returns, life insurance policies and credit card statements.
If you're worried that your spouse may retitle or liquidate the marital assets, get an attorney right away and seek a restraining order from the court. If your spouse hides assets, the forensic accounting fees can add up.
Not considering an amicable divorce.
If your marital assets are moderate, joint physical custody is workable and your spouse would agree to a fair settlement, then you should highly consider mediation or a collaborative divorce.
Such methods can save you thousands in legal fees and emotional aggravation, and provide more flexibility over a contested divorce.
Punishing your spouse for bad conduct.
This is a bad idea for many reasons. First, California is a no-fault divorce state and divorce settlements are determined by the state's community property laws. The court won't punish your ex financially for treating you poorly or having an affair.
An expensive divorce means less of a settlement. Treat your divorce as a business transaction and remember, the best way to get revenge is to flourish and prosper after the divorce.
Ignoring the tax implications of divorce.
It comes down to your share of the marital assets after the taxes are paid. When considering a divorce settlement, look at the value of all of the assets on an after tax basis. Then decide if you're getting a good deal.
Getting divorced too soon.
Remember, once a couple has been married 10 years or longer, a spouse is entitled to receive half of their spouse's Social Security at retirement and the ex's payments won't be affected.
It's surprising how many couples get divorced after 9.5 years, when waiting just 6 months longer would increase a spouse's retirement options without reducing the other spouse's payments.
Forgetting to update beneficiaries.
After a divorce, people frequently forget to update the beneficiary designations on their life insurance policies, bank and retirement accounts and will.
The result: their ex husband or wife ends up inheriting a large portion of their estate which they really wanted to leave to their children, a new spouse, or a beloved charity.