Costly Mistakes People Make Concerning Their Divorce
Many divorcing couples worry about how much their divorce will cost them; on average, a contested divorce costs about $13,500 in Missouri, and an uncontested divorce costs around $2,000. However, getting divorced doesn’t have to “break the bank.” Here are eight divorce mistakes that you should avoid as they can cost you—long after your divorce is over.
1. Failing to Close or Address Joint Credit Accounts
Even if one party has responsibility for a debt, the other spouse’s credit can still be affected if their name is on the account. During your divorce, you and your spouse’s marital debts will be divided. However, your divorce decree and settlement do not negate your loan agreements, meaning accounts will still have both parties’ names.
You will need to contact your lender to remove either party’s name and in some cases, you may have to refinance. For credit cards, you can request that a person can be removed as an authorized user.
2. Ignoring Tax Consequences
There are important tax considerations that you should be aware of during your divorce. Failing to consider tax consequences can impact your financial future. Here are a few important tax considerations divorcing couples should know include:
- Alimony and child support are tax neutral.
- Even if you share custody and are eligible for the Child Tax Credit (CTC), only one parent can receive this tax benefit; the parent with whom the child resides for the majority of the year will receive the CTC in most cases.
- Until your divorce is final, you can still file jointly if you so choose; however, you can file separately if you wish.
- While most asset transfers during the divorce are exempt from capital gains taxes, you should consult with an attorney and/or accountant to understand the tax implications of asset transfers and sales.
- If you are dividing retirement assets, review and understand the tax implications of early withdrawals of retirement funds.
3. Failing to Get All the Paperwork
In some cases, only one spouse handles finances and paperwork. However, if you are planning to get divorced or have initiated the process, you should gather important paperwork and account information, including:
- Account numbers and balances
- Social security and tax statements
- Asset information (i.e. amounts paid, location, home improvement receipts, etc.)
These documents can help you with child support and alimony determinations as well as property and debt division settlements. This data can also help you if you suspect your spouse has hidden certain assets.
4. Forgetting to Update Estate Documents
Many life events signal that you should review and update your estate plan; one of these life events is divorce. Working with an attorney you should:
- Revoke your existing will and draft a new one
- Update your healthcare proxy and any other powers of attorney
- Revise guardianship designations for your children
- Review your life insurance policy and any work-based life insurance
- Consider setting up a trust that can manage your child support and/or spousal support payments
5. Failing to Draft a Post-Divorce Budget & Financial Plan
You should draft a budget that outlines your expenses now and expenses that will still be your responsibility after your divorce. In comparing the two budgets, you can better understand whether you will need alimony or child support as well as whether you will need to cut back on your expenses.
6. Assuming Litigation Is Inevitable
Divorce litigation occurs when couples file contested divorces and petition the court to make determinations concerning the terms of their divorce. Contested divorces are often more time-consuming and expensive than uncontested divorces.
With uncontested divorces, couples will have to agree on the terms of their divorce when they file. To iron out the details, you should consider mediation or a collaborative divorce, which can save you a lot of money as alternative dispute resolution processes are less costly.
In the collaborative divorce process, each party has an attorney (familiar with this process) that helps them negotiate the terms of their divorce outside of court. Divorce mediation involves having a neutral, third party mediate and help you and your spouse agree on the divorce terms.
7. Oversharing on Social Media
Social media posts can be used against you in court, even if you have a private account. A seemingly innocent post can be misinterpreted or harmful to your case. For instance, if you post about a work bonus, vacation, or constantly going out with friends, the opposing counsel may use those posts as leverage in negotiating alimony or child support payments.
8. Failing to Retain Reliable Legal Counsel
To save money, many people consider representing themselves in their divorce. However, failing to retain counsel can end up costing you money if you agree to unfavorable terms or have to refile paperwork. Even if you plan to file uncontested, you should have an attorney review your paperwork and agreement to ensure your interests are protected.
A skilled divorce attorney can help you make informed decisions and avoid falling into the financial pitfalls of divorce. They can also:
- Offer an objective opinion. Another divorce mistake to avoid is making decisions based on your emotions, and your attorney can help you avoid this mistake because of their more neutral position.
- Help you develop a solid case strategy. An attorney likely has more legal knowledge than you, and their understanding of the laws governing your case can help them develop a strong, personalized legal strategy for your case.
- Help you with negotiations and litigation. An attorney also has more legal experience with negotiations and litigation; they may also have experience with certain judges or attorneys, which can inform their case strategy.
- Connect you with experts. If you need to retain a private investigator, forensic accountant, or another expert, an attorney often has professional contacts and relationships that can be used to easily connect you with them.
Don’t make the mistake of trying to navigate your divorce alone. Contact Kallen Law Firm, LLC today to schedule a case consultation. Call (314) 441-7793.
