A Guide to Avoiding the Top 4 Divorce Settlement Mistakes
Divorce is emotionally devastating. High level of stress is of no help when you need to negotiate the terms of settlement. Small mistakes may cost you a lot financially. These decisions cannot be revised at a later time. You only get one chance to get it right, and with stakes this high, mistakes are very common.
Four common mistakes made during a divorce settlement and avoiding them:
- Undervaluing marital assets: You may feel that it is pointless to look into every investment and assets accumulated over the years of being together. Divorce is often the last straw that breaks a relationship. There is no clean break and it isn’t an impasse. It a harsh reality that emotionally wrecks you and leaves you broke if you aren’t careful. It is not unheard of that a spouse hides a few investments or undervalues a certain asset to reduce the alimony. Therefore, it becomes very important to value all assets before you go in for settlement. Audit each partner’s financial situation to get a clear perspective of where each stands. The review must include bank statements, tax audits and investment accounts. While valuing the assets do not overlook the liquidity of an asset.
- An emotional foul play: Emotions can mangle the entire settlement proceedings. Remember that you came to conclusion of separating because of emotions in the first place. Do not let them get in the way. An emotional play will not leave you with the best financial stand. Emotions make it easy to manipulate a situation. For example, think of the family pet. If the husband is more emotionally attached to the pet, the wife may try swindling him for a greater sum holding the pet as bait.
- Unrealistic financial plan: Prior to establishing a financial settlement sum, each spouse should look into their current financial stand and estimate their living expenses post-divorce. The cost should include insurance, rent, health care, and cost of grocery, schooling cost, transportation, income tax and utilities.
- Overlooking credit and debt issues: As mentioned above, it is common for a spouse to hide their assets from each other. To clear the air, the spouse must procure a copy of credit report during the early divorce proceedings. The statement will present a clear picture of any credit or debt issues. Joint debt must be cleared before the settlement process to increase the credit rating.
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