Three Serious Divorce Settlement Mistakes
When you are facing a life changing transition such as divorce, what do you think you will find more valuable: Someone to make you feel a little better by hinting that nothing has to change, or someone who will give it to you straight and honestly?
There are not enough people in the world of divorce professionals that will truly tell it like it is. Some tell you want you to hear, which can lead you to make some critical mistakes that are easily avoidable, and just don’t need to happen.
Your household income as a couple will now be supporting two households, so yes, things HAVE to change. Settlements are sometimes agreed to (or even ordered by a Judge), then folks come to me after-the-fact confused and bewildered. I read through their agreement and just shake my head with these!!
#3 – The settlement doesn’t take taxes into effect – AT ALL!
We all know that Uncle Sam will dive into our pockets at every opportunity. Don’t agree to a settlement without knowing the tax implications of your decisions.
What people often find is that the tax burden on their half of the marital assets is significantly higher than their spouse’s, making their “half” worth significantly less than they thought. Many Attorneys don’t have a financial background and may not discuss this issue with you, so beware.
#2 – Pensions are split 50/50, but no one knows what that really means.
Over and over, I see divorce agreements that order pensions split 50/50, but no one has answers to critical questions such as: When do you start collecting the benefit? Is there an option to take a lump sum? Will there be a cost of living increase each year? What if you or your spouse passes away? Will the pension keep paying out? At what rate?
Bringing on a Certified QDRO Specialist (CQS) such as myself, early on in the process can help you get the answers you need to make fully informed decisions. Why would you possibly agree to a settlement without understanding something so crucial as your future retirement?
#1 – Drum Roll – The biggest mistake I see is wanting to keep a house you can’t afford.
I understand you can get emotionally tied to the family home and really want to stay. Before you even consider this option, you must do a detailed cash flow review. I strongly suggest you meet with a Financial Professional to help with this.
You don’t want to be the person who “kept the house”, and then one or two years down the road you run out of cash, realize you can’t sell a window to put food on the table, or can’t refinance because you don’t have enough income. Then maybe the only choice is to sell. The selling costs are about 8% of the sale – all of which could have been split 50/50 with your ex if the house had been sold as part of the divorce. Completely avoidable mistake.
So listen, ignorance is probably an accurate way to describe this, but please realize you don’t know … what you don’t know. Bring in the right experts for your divorce to make sure that you are smart and make the best decisions you can with all the information.
Don’t go this alone. As we say at Sand Oak Divorce Solutions, “You only have one chance to get it right! No do overs, so let us help”. Call our office at (850) 252-6325 to schedule your 30-minute initial strategy session.
