1. The Twelve Financial Pitfalls of Divorce
For most people, divorce is the biggest
financial transaction of their lives
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2. FINANCIAL PITFALLS OF DIVORCE About Me and Our Firm
Your name, address, phone, , firm logo – whatever you want to put about yourself here
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3. FINANCIAL PITFALLS OF DIVORCE #1. Not Enough CASH
Cash = Power & Independence…..
Divorce is a very cash hungry situation
Legal fees, mediators, therapists, etc
What if your spouse stops paying the bills?
Costs to move out and replace items
Sources of cash
Savings and investments
Credit cards – approach with caution
Home equity loans – be careful here too
Friends and family
Loans from retirement plans
IRA withdrawals –last resort because of taxes and penalties
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4. FINANCIAL PITFALLS OF DIVORCE #2. Too Little PREPARATION
Look before you leap …..
Preparation makes you less afraid, better able to act
Talk to your attorney before you talk to your spouse
Right timing is important – for Social Security, finances, support, family situation
Get into shape before you go – fix the car, buy clothes, get dental work done, repair property you want to keep
Inventory safe deposit boxes and vaults
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5. FINANCIAL PITFALLS OF DIVORCE #3. No RECORDS
Document, document, document …..
Copy everything you can find
Get copies of your tax returns and read them – they are a treasure map
Review bank statements, credit cards and check registers to analyze your spending
List all your assets and debts
Trace separate property
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6. FINANCIAL PITFALLS OF DIVORCE #4. Overlooking ASSETS
Half of everything is yours …..
Frequent flyer points, accumulated vacation & sick pay
Hobby equipment, collections, art work
Your Ph.T degree (Putting Honey Through)
Business assets and goodwill – how they are valued
Retirement plans –current and former employers
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7. FINANCIAL PITFALLS OF DIVORCE Retirement Plans
Social security for divorced spouses
Divorced spouse benefits available if greater than your own benefits and married 10 years
Government pension offset of divorced spouse benefits
Effects of remarriage
Death of former spouse
Dividing retirement plans
Using a QDRO to divide qualified plans
IRAs often don’t require a QDRO
Federal plans require special documents
No need to divide if each keeps their own plans
Military retirement & benefits
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8. FINANCIAL PITFALLS OF DIVORCE #5. Ignoring TAX CONSEQUENCES
Hidden tax issues can turn a sweet deal sour …..
Hidden taxes in highly depreciated rental property
Retirement plans aren’t worth the same as home equity because of eventual taxes that must be paid
Child support isn’t taxable when you receive it, alimony is for support agreements executed before January 1, 2019
Claiming your children for tax purposes, or using Form 8332 to relinquish the exemption for child
Indemnification clauses to protect you from future tax issues
Tax issues regarding house
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9. FINANCIAL PITFALLS OF DIVORCE Dealing with the Family Home
Buyout by one spouse and transfer of title isn’t taxable
When you sell you won’t pay tax on first $250,000 of gain
If sold while in both names, each spouse can exclude $250,000 of gain if the resident spouse is given exclusive use of the property during period before sale
Can you really afford to keep the home?
What assets will you give up in order to do so, and what will your future be like without those assets?
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10. FINANCIAL PITFALLS OF DIVORCE #6. Believing IGNORANCE IS BLISS
In divorce you’ll pay a high price for ignorance …..
Divorce is not fair, so don’t waste money trying to get exactly your share – do the best you can and move on
Take an active role and learn as much as you can about your financial situation
Learn as much as you can about the legal process and explore alternatives
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11. FINANCIAL PITFALLS OF DIVORCE #7. Mixing Money and EMOTION
In divorce it’s easy to confuse your feelings with the facts …..
It’s expensive to cry in your attorney’s office, so don’t do it
(Whining is expensive, too)
Don’t try to make him pay for what he’s done
Don’t try to “win” the divorce – it’s the two of you solving the problem of dividing things up
Don’t just take whatever he offers because you feel powerless
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12. FINANCIAL PITFALLS OF DIVORCE #8. Not Fighting for WHAT’S YOURS
Divorce is about survival, not manners …..
Don’t make nice just to smooth things over and make him feel better, or to try to get him back – it won’t pay off
Don’t underestimate your needs – you’ll need to pay for health insurance
Discuss the kids’ needs – their expenses while in school, who pays for college costs
Don’t waive alimony unless you get something very valuable in return – consider carefully the impact on your future finances
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13. FINANCIAL PITFALLS OF DIVORCE #9. Not Taking CONTROL
No one cares as much about your future as you do …..
Don’t worry in the dark - make lists of what needs to be done, go back to sleep, and tackle it in the morning
Take control of bank accounts and investments so they don’t disappear – control, don’t conceal
Consider breaking joint tenancies so he doesn’t get it all if you die during the divorce
Protect your support with life insurance on his life
This is your divorce, not your attorney’s, so do what makes sense for you
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14. FINANCIAL PITFALLS OF DIVORCE #10. Not Being READY for the Worst
Don’t let fears rule you – face them and move forward …..
What’s the worst that can happen, and how will you survive?
Being ready for the worst prevents panic
Join a divorce group where you can get the support and input from others in your situation
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15. FINANCIAL PITFALLS OF DIVORCE #11. Not Developing a CAREER
There’s a big difference between a job and a career …..
Two households are expensive, so divorce may push you into working
If you need more income, what career would work for you, and what education would you need?
Negotiate to get more support while in school and less once you are more self-supporting
Nothing bolsters self-esteem like a fulfilling career
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16. FINANCIAL PITFALLS OF DIVORCE #12. Not Getting Good ADVICE
Divorce is too complicated to go it alone …..
Hire an attorney to whom you can relate, not the most expensive or the cheapest one
Find a good therapist to help you emotionally – this isn’t the time to tough it out
Use a financial professional to help you make the best financial decisions for you and get your financial life in order after your divorce is final
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