Splitting one household into two only multiplies the cost. However, education, planning and rational thinking can help curb the financial impact. At such a time, knowledge about finances and avoidance of costly mistakes can be highly empowering.
- Realistically assess your financial position. Obtain copies of all financial documents pertaining to property and debt titled in individual and/or joint names. You need to have a clear understanding of what the marital estate consists of before you can decide how to divide it.
- Acknowledge the potential decline of your standard of living. In divorce, trying to stretch the same amount of income over two households is extremely challenging. The financial reality of tomorrow may be quite different from today. The sooner you can cut spending and live below your means, the better off you’ll be. It’s critical to develop a realistic budget for forecasting current and future expense and income needs.
- Do your own discovery. Accurate information on your case is critical for the professionals you hire to adequately represent you. They will need detailed information regarding all assets, debts, sources of income, expenses, tax information, real estate holdings, and employee benefits. Invest your own time locating and providing as much of this information as possible. If you don’t, your attorney will have to spend significant time (and your money) gathering the information or requiring your spouse to produce the documents. Keep copies of all documents in an organized fashion. Realize that in some cases, documents can sometimes “disappear” as emotions escalate, so it may be best to store all copies of documents in a neutral safe location.
- Understand the true value of assets. Before agreeing to retain or give up an asset you must know its cur-rent value, tax consequence, transaction costs, and original cost basis. What you get is not always what you keep. Once a property settlement has been signed and the divorce is final, it’s too late to renegotiate an unfavorable deal.
- Realize you may not be able to afford the family home. To keep the home, you need to have the means to support not only the mortgage payment, but the real estate taxes, maintenance, utilities and costs associated with refinancing the home into a single name. Assets are not created equal, so be aware of what you may be giving up should you keep the house.
- Don’t use your attorney as your therapist. The divorce process is stressful. With that said, your attorney is your legal representative, not your psychologist. At $200 – $400 per hour, it is very expensive to use your attorney for this purpose. If you need support, use a trained mental health professional. Their hourly rate will be significantly less expensive and services may be covered by your health plan.
- Get help to understand your financial situation. Financial issues and property division can be one of the most complicated and time-consuming aspects. Costs can quickly escalate the more drawn out a settlement becomes. You retain an attorney because of their ex-pertise on legal issues, however many attorneys do not possess specialized knowledge dealing with complex financial issues. Seek the services of a Certified Divorce Financial Analyst® (CDFA) to get the necessary help organizing information and understanding the various property and tax issues, and other decisions you will be facing before you consent to a settlement.
Using specialized software, a CDFA can show a variety of property division options to visually illustrate the short and long-term financial implications for both par-ties. Reviewing the financial impact of a settlement, not just on the date of division but also into the future, can help you move forward with confidence. This allows for a “what if” analysis to make sure the settlement makes sense. These types of reports can also help you and your attorney demonstrate to your spouse an equitable division of the marital property. Professional assistance during negotiations helps assure you don’t make irre-versible mistakes.
- Limit conflict and increase communication. You must recognize that the more you “fight” the longer and more drawn out your divorce will be, and the more it will cost. Don’t let your attorney or your spouse’s attorney encourage conflict. Try to think rationally and keep the lines of communication open with your spouse. If you can remain open to compromise, it will potentially save thousands of dollars. There is no benefit in trying to extract vengeance on your spouse or try to make your ex pay for their bad behavior. Leave revenge at the door. The division of marital property typically culminates in a fashion that is fair and equitable to both parties.
- Explore alternatives to litigation. Battling out your divorce in court is lengthy, costly, and emotionally draining. Methods that are more cooperative and less adversari such as mediation or collaborative divorce often result in a more favorable outcome while saving time and money. These approaches help find common ground and settle on an agreement that is mutually satisfactory. If the parties can be flexible and determine solutions to their issues, this can help promote a cooperative relationship in the future. This often helps the parties to move on with the least amount of stress and conflict, especially when there are children involved. To effectively co-parent, both parties will need to work together post-divorce to minimize negative consequences the divorce may have on their children.
The more knowledgeable and informed you can be-come will help diminish some of the fear and uncertainty that may be present, and you will benefit from making logical decisions. It’s important to think from a financial stance vs. an emotional one because post-divorce you can’t go back and re-negotiate an unfavorable settlement. Using legal and financial professionals who are specifically trained will help you along your journey. This will save time and money and help ensure an effective outcome.
Donna has over 30 years experience in the financial services industry. As the owner of Cheswick Divorce Solutions LLC., she helps individuals, couples and family law attorneys across Southwestern Pennsylvania with all the financial complexities that arise during divorce to help ensure the most financial advantageous settlement possible. Donna also is a trained divorce mediator and collaborative financial neutral. Contact her at 724-493-9695 to schedule a complementary 30-minute phone consultation to discuss your case.
