Michigan Divorce Lawyer Attorney & 5 Financial Mistakes in Divorce
By avoiding these 5 financial mistakes during a divorce it could save you thousands of dollars after your divorce is final. Many people act on emotion rather than logic and therefore make mistakes they later regret. Here are the 5 financial mistakes you must avoid.
1. Holding on to the marital home at all costs
In a divorce situation many times one spouse decides they can afford to keep the house and buy the other spouse out by giving them their share. However, keeping the three or four bedroom marital home may be a financial undertaking that neither party can absorb in the post-divorce environment. Especially with economic times the way they are right now, the amount you buy out your spouse for now may not be the same amount of equity you will get when you go to sell in a year or two. A good Michigan divorce attorney will help you decide whether it is a good financial decision to purchase the home. Usually it is not a good move.
Home values are declining throughout the country and it is a good idea to get your money out of the marital home and then downsize. If you wait to sell the home, your half of the equity could end up vanishing as your home value diminishes in a declining real estate market. Maintenance and child support to the recipient parent can help fund the mortgage and taxes, but some parties find that the burdens of keeping the marital home post-divorce outweigh the benefits, especially in this current home market/mortgage environment.
2. Failing to make a clean financial break.
Clean separation of assets and debts is another difficult task, but one that needs to be done. During the divorce process it is usually a roller coaster ride. Some days are okay and some days are nightmares. You should not take a chance on your spouse running up debt that could negatively affect your credit score. Once a debt is reported to your credit bureau it is very difficult and time consuming trying to get it removed.
3. Counting on your ex to honor financial commitments.
Depending on your former spouse to comply with financial arrangements is also a huge mistake. Although both parties in a divorce are held to a court-ordered divorce agreement, creditors are not bound by the terms of the divorce judgment. If your ex fails to pay on debts or loans, you may be suffer the consequences when applying for future financing. If the divorce procedures are going smooth you would think you never have to worry but all it takes is one argument and usually there are bitter feelings that could lead to one spouse not cooperating. You can prevent this by not depending on that spouse for any financial commitments unless it is in writing.
4. Forgetting to change your will and beneficiary forms.
Wills and trusts can also be seriously impacted by divorce proceedings. Parties in divorce should separately seek counsel for the redrafting and execution of new estate plans, reflecting the wishes of the maker of the will and/or trust prior to the time of the divorce.
5. Overlooking taxes.
Finally, never forget which amount of money in your divorce settlement is maintenance, and which amount is child support. While child support payments are not taxable to the recipient, maintenance payments are. Having a great accountant could come in handy to keep great records of your finances if you are too busy to do so.