August 20, 2018 by admin_wpp
If there is ever a time to be rational and unemotional about money, it is during a divorce. In most instances, however, emotions take center stage during the divorce process. While this is certainly understandable, many of these financial decisions can dramatically impact the lives of the couple involved as well as their children and other loved ones. Sadly, altering a financial faux pas usually becomes more difficult once the divorce papers have been signed. Read more to learn about Financial Mistakes to Avoid During a Divorce.
Even if a divorce appears on the surface to be amicable, transparency and honesty often get cloudy in the transition from the married to single status. People facing an uncertain future may resort to skewing the truth if it means coming out better than worst on the other end. And, nowhere is duplicity more evident than when it comes to divvying up finances.
The following are some steps you can take to avoid derailing your financial future during or after a divorce.
- Compile a list your assets. Make an accurate account of all financial information including income versus expenses, debt, savings, and properties, etc. Keep in mind that hiding money or assets from your spouse is illegal. The legal terminology used by the Internal Revenue Service to describe this behavior is “fraudulent conveyance” which can incur serious penalties and jail time in some instances. A divorce attorney can help you to complete a “Statement of Net Worth” which itemizes your marital property and provide an accurate picture of your financial status.
- Evaluate the cost of your new lifestyle. Failure to estimate what your new lifestyle will cost after the divorce can cause you to make financial mistakes such as depleting savings or dipping into a retirement fund. Many people end up giving up more than they can reasonably afford during a split. This usually happens because they have been worn down by arguments and conflict. Make sure the divorce settlement agreement is explicit and fair. A financial planner can simplify the financial division process, and IRS issues as well as create a financial plan for your new life based on your income, expenses, assets, and liabilities.
- Consider tax implications. Divorce can affect income tax issues relevant to investment, money and property transfers. The IRS is will also want information about alimony, IRA, name and address changes.
- Ignoring the potential impact of Inflation. In order to make an accurate forecast of expenses during a divorce, it is important to consider the effect of inflation. This could have a direct impact on retirement and your children’s education down the road.
Be proactive about protecting existing finances. A financially savvy spouse often gains an unfair advantage over a husband or wife that has no clue about the couple’s monetary status. Be aware that your spouse can liquidate property, transfer cash and retitle assets without your consent. Don’t wait too long to separate joint accounts, double check credit history and change common passwords. Also, take the time to talk to your creditors about debt obligations. Don’t assume your ex will continue to honor a debt repayment agreement after the divorce. If you can, make sure your name is removed from any property that was signed over to your spouse.
If you want to learn more please contact The Law Offices of Nugent Zborowski @ 561-844-1200
The Law Offices of Nugent Zborowski
631 US-1, Suite 402
North Palm Beach, FL 33408