If you’re going through a divorce, it’s important to be aware of common financial mistakes made by spouses. Being aware of these issues can help you protect your financial health during and after your breakup.
Rushing through the process
Divorcees want their soon-to-be ex out, especially if there’s abuse. In a rushed divorce, assets may be unfairly divided for the vulnerable spouse. In an attempt to end a relationship, one party may persuade the other to accept less than they deserve.
When you marry, assets are intermingled. Get help locating and valuing them.
Refusing to participate in mediation or arbitration
Arbitration or mediation can replace litigation in court. Each spouse retains control over the outcome, rather than a judge. Attorneys should protect spouses’ interests.
Not sharing your retirement assets fairly.
Couples can own retirement accounts (but not jointly), but their assets can differ significantly. QDROs let couples split retirement plan assets fairly without early withdrawal penalties for either party.
One prominent example is a marriage where one partner has 401(k)s while the other raises the kids full-time. Without jobs, spouses can only use spousal IRAs to save for retirement. The working spouse has more retirement assets because of lower contribution limits in IRAs.
Having no long-term plans for child support.
Divorcing couples should provide financial and emotional support to their children until adulthood. Child support depends on income, time with each parent, and age.
Don’t use daily expenses to calculate child support. Include future education, medical, and extracurricular expenses.
All parents should contribute, even if they’re divorced. One parent claims the child tax credit every year. Shared custody and advance child tax credits should be addressed.
This is what you need to know about top financial mistakes in a divorce settlement. As you go through your divorce, control your feelings about your spouse so assets can be divided fairly.