During a divorce, it is easy to let your emotions overpower your judgment, particularly with regards to preserving your assets. It is understandable to want to get the divorce process over with as soon as possible, but not at the expense of your future financial well-being.
It is important to take the time to consult with your financial advisor, accountant and divorce attorney to give every intricate detail the attention it deserves. It is also vital to avoid mistakes that could cost you your fair share of the marital assets or that put your personal finances at risk.
Below are six common mistakes that can affect your assets in a divorce:
- Missing assets - What you don't know about can't be factored into the division of property. Thoroughly account for all current assets, such as bank accounts and non-cash assets, as well as future interests, such as pensions, business interests or start-up stock options. Consider hiring an investigator to uncover any hidden assets.
- Ignoring tax implications - Taxes matter when obtaining a fair settlement. When comparing taxable with non-taxable assets, consider the value of property such as retirement accounts after taxes are applied.
- Keeping accounts connected - Joint accounts and beneficiary designations can be a liability when going through a divorce. Spouses should make efforts to separate by opening separate bank accounts and closing joint credit cards. As the divorce progresses, change beneficiaries for annuity contracts, life insurance policies, retirement accounts and other assets.
- Withdrawing from retirement accounts - Although it may be tempting, it is best to avoid tapping into retirement accounts to fund the divorce or pay off joint debt. Keep these accounts as part of your assets included in the divorce settlement.
- Getting emotional - Overvaluing certain assets can make your settlement lopsided. Get professional appraisals for real estate, businesses and other valuable assets.
- Misunderstanding jurisdictional laws - Make sure you understand the rules in New York, or the state where you are divorcing, with regard to marital property and alimony. It can vary greatly from state to state.