You Only Get One Chance At Divorce. Don’t Screw It Up!
By Duncan E. White, Owner
Inkpointe Divorce Solutions, LLC
When you are facing a life-changing decision like a divorce, what do you think would be more valuable: Someone to make you feel better by saying that nothing needs to change, or someone who will give it to you straight? I feel strongly that not enough divorce professionals will truly tell it like it is. They tell you what you want to hear which can lead to some costly, and avoidable, mistakes.
During the divorce process, you need someone to tell it like it is. Your household income as a couple will now be supporting two households so, yes. Things. WILL. Change.
Let me guide you through that change with some simple facts and help you be smart with your choices!
Here are a few things I see repeatedly when it comes to divorce. Settlements are agreed to (and sometimes even ordered by a judge) then the people come to me after-the-fact confused and bewildered and I read through their decree and shake my head.
Please don’t be someone who makes the following mistakes!
#3 – The settlement doesn’t take taxes into account – AT ALL!
We all know that Uncle Sam will reach into our pockets at every opportunity. Do not agree to a settlement without knowing the tax implications! What people often find is that the tax burden on their half of the marital assets is significantly higher than their spouse’s half. More specifically, don’t expect your attorney to explain this! Attorneys are not accountants or financial advisors and most of them won’t bother to warn you of issues like that. Buyer beware in this situation! Either you know what’s coming your way on taxes … or you don’t.
#2 – Pensions are split 50/50 but what does that really mean?
Over and over, I see divorce decrees that order pensions split 50/50 but no one has any idea what will actually happen. When do you start collecting? Is there an option to take a lump sum? Will there be a cost of living increase each year? What if you or your spouse dies? Will it keep paying? Will it double? When I ask these questions, normally no one has ANY IDEA what the answers are. How can you possibly agree to a settlement without understanding something so crucial to your retirement? Again, don’t expect attorneys or mediators to be of much help.
#1 – Keeping a house you can’t afford.
I understand you can get emotionally tied to the family home and really want to stay. Before you even consider this option, you must do a budget. I also strongly suggest you meet with a financial planner.
Helpful hint: Consider talking to a Certified Divorce Lending Professional® to get some guidance on how to qualify for a mortgage that allows you to keep the house … for good!
I have witnessed situations where, one or two years down the road, the spouse who “won the house” has run out of cash. At this point, they come to the all-too-late realization that they can’t sell a window to put food on the table and they can’t refinance because now they don’t have enough income to qualify for a new mortgage. They have no choice but to sell.
The selling costs are about 8% of the sale – all of which would have been split 50/50 with the ex if they had sold as part of the divorce. Now, it’s entirely out of their pocket.
Please take time to admit that you don’t know what you don’t know. Then spend some time working on changing that. Bring in the right professionals for your divorce to make sure that you are making smart decisions with all the information in front of you! Don’t go this alone.
As we say at Inkpointe Divorce Solutions, LLC, “You only have one chance to get it right!”
We would be glad to help you get it right the first time.
Duncan E. White is a Certified Divorce Financial Analyst (CDFA®) and has been a licensed financial advisor since 2010. He leads a Second Saturday Divorce Workshop each month for the benefit of those seeking information about the divorce process.
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Content in this material is for general information only and not intended to provide specific advice or recommendations for any individual. LPL Financial and Inkpointe Divorce Solutions do not offer tax, legal or mortgage lending services or advice.