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Common Financial Mistakes People Make During Divorce

It is not uncommon for one person in a married couple to handle the household finances. In the event of a divorce, this person often has an advantage over their partner. Due to a lack of knowledge or experience, some spouses in New Jersey make significant mistakes during a divorce that could have long-term financial consequences. Yet, even people who ran the household finances might be unaware of obstacles that did not exist while a couple was married.

Most married couples have joint liabilities, such as a loan or credit card in both people’s names. One party might informally agree to take responsibility, but that does not mean the lender will respect that decision and let the other person off the hook. People might wish to also transfer retirement assets as part of a settlement, but this should be done with a decree, like a qualified domestic relation order, to avoid unnecessary taxes.

For people who are not used to keeping track of finances suddenly needing to be responsible for paying bills and establishing a budget can be difficult, but those steps can be important. People need to know how much cash they need while going through a divorce and how much they need for the future needs negotiating a settlement. Each person also needs to familiarize themselves with their taxes. Looking up the past three years’ worth of tax returns, at least, can help identify what are known as tax assets, which can lead to tax reductions.

Going through a divorce means significant changes in people’s lives and possible changes to their lifestyles. Maintaining two households instead of one might require that people adapt in ways they did not predict, but by planning ahead and being aware of potential pitfalls people are more likely to come out of a divorce with healthy finances. An attorney could assist by negotiating a fair settlement that meets an individual’s financial needs in the immediate and distant future.

Source: Forbes, “6 Money Matters Divorcing Spouses Often Overlook“, August 19, 2014

Source: Forbes, “6 Money Matters Divorcing Spouses Often Overlook“, August 19, 2014