The Kenwood Press|
A win-win divorce
Most people are not well informed about a financially smart divorce. U.S. Bankruptcy Court statistics show that the financial ramifications of divorce are the fifth most frequent reason cited for bankruptcy in this country. The true cost of divorce includes not only attorney fees, but also possibly thousands of dollars you may unintentionally give your soon-to-be ex-spouse, or to the IRS.
A 50/50 settlement isn’t always fair. If a spouse put his or her career on hold, or left the career world to care for children, this should be considered during settlement discussions. What is the earning potential today for the one who stayed at home? How long will she or he need to work at a first post-divorce job before they return to a self-sustaining income? Career counseling helps create realistic expectations and reduces returns to attorneys to restructure settlements. It’s typically impossible to transition from a stay-at-home parent to financial independence quickly. If minor children are at home, the work schedules for both parents are impacted and may reduce income potential. Additionally, the settlement must ensure both spouses understand long-term implications of the proposed settlement and potential impact on the family, i.e., inflation, increased expenses for older children, and more.
Common divorce money mistakes(provided by Arons & Associates)
According to Price Waterhouse Cooper, divorced women who are single parents are most likely to file for bankruptcy. Mothers frequently want to keep the house and sacrifice retirement money or other assets. When worried, their instincts are to keep the family together, minimizing disruption for their children. Most women don’t compile a detailed list of living expenses and believe they can afford the house. They forget about roof repairs, appliance replacement, insurance deductibles, and new tires. Women frequently keep a house they cannot afford and then plunge into debt – and many times bankruptcy – trying to keep a dream alive.
Men make plenty of their own financial mistakes during divorce. But men typically earn more than their wives: the negative impact of their decisions aren’t as great. It’s equally important that they have a complete list of living expenses and tax issues (including capital gains taxes on investments sold and penalties for early withdrawal from retirement accounts.) Otherwise, good intentions or a guilty conscience could cause a husband to agree to a divorce settlement he can’t afford. He and his ex-spouse will be back in mediation or court within two years and the expense of divorce continues.
Retirement benefits often form part of a couple’s total marital estate. If one of you has a retirement plan at work, you should consider the following:
Divorce doesn’t have to be a battle. When you have the financial information and education you and your attorney need to make informed decisions, you’ll have a better future outcome.