1. Not Establishing a Budget– The most common mistake spouses make when pursing divorce is not establishing a legitimate monthly budget. If no monthly budget is ever established, how can spouses know how much
support/marital assets he or she must receive to be equitable?
2. Keeping the Marital Home– The marital home is almost always the largest asset couples have when pursing divorce and many spouses want to keep this asset for various reasons. A spouse should only keep the marital home if he or she can afford it! If the spouse who keeps the marital home cannot afford it, they will be forced to sell the home, resulting in that spouse receiving an asset that has been severely depleted from the initial value received through the divorce decree (Capitals Gains Tax, Sales Costs, Etc.). Spouses should consult a financial specialist to see if they can afford the marital home BEFORE an agreement is signed.
3. Assuming that a 50/50 Split is Fair– Maryland, like most U.S. States, is an “Equitable Distribution State” when considering divorce, meaning that a 50/50 split of marital assets is no longer what qualifies a divorce settlement offer to be equitable. A settlement is now seen as equitable when first considering all financial aspects of both spouses before coming to an agreement.
4. Not Considering Marital Debt– When being divorced, it is important to not only equitably distribute a couples marital assets, but also the marital debt they have accrued if any, so that one spouse is not left with paying off more liabilities then the other.
5. Failure to Consider Long-Term Financial Security- Spouses tend to look at just the short term financial implications of a settlement offer like living situations, alimony, property settlements, etc. It is beneficial to hire a financial specialist when pursuing divorce, in order to know the long-term financial implications a settlement offer would have on a spouse BEFORE an agreement is signed.
6. Qualifying For a Mortgage- In order for a previously divorced spouse to qualify for a mortgage using alimony as income, the spouse must show 6 months of alimony already paid, as well as three years to be paid. This means to qualify for a mortgage using alimony as income, party’s must agree that it is to be paid for at least 3 years. Spouses should also seek their eligibility to qualify for a mortgage BEFORE an agreement is signed.
7. Having Unrealistic Expectations – The last and most detrimental financial mistake made by divorcing spouses is attempting to receive as much money as possible from the ex-spouse. When a spouse try’s to receive as much money as possible and are not willing to work together, this can lead to extended litigation, resulting in extremely high legal fees for both spouses. If a spouse is willing to cooperate from the start, the couple’s marital assets will not be depleted from legal fees, and both spouses will receive higher asset values then they would through litigation.
Financial Mistakes to Avoid During a Divorce By: Steven F. Bryant, Certified Divorce Financial Analyst® Synergy Divorce Solutions Baltimore, MD. www.synergydivorcesolutions.com