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Five Common Financial Mistakes to Avoid in a Divorce Settlement
| Divorce creates a huge emotional upheaval for both parties. Addressing
financial concerns of a divorce in a calm and objective manner will
benefit everyone in the long-term. It's common for both parties to
focus on immediate financial concerns during a divorce settlement. Yet,
it is the long-term financial consequences of divorce that frequently
are more devastating. Here are five of the most frequent divorce financial mistakes and how to avoid them. 1. Taking the house. The spouse who will have custody of the children typically wants to keep the family home. While this may be desirable emotionally, it can be financially problematic. A home is an illiquid asset that costs money to pay for and maintain. Consequently, it may be better financially to sell the home and split the proceeds. 2. Assuming equal is equitable. Frequently, the wife takes the house and the husband keeps his pension or retirement accounts. Say both are valued at $400,000. The home is a cost-burden, while the retirement account is a liquid asset that can continue to grow, tax deferred, and probably at a faster growth rate than the home. 3. Not examining earnings potential. Often, one spouse has minimized a career in order to raise children. The settlement needs to take this into account, perhaps by providing extra money to the homemaking spouse to pay for additional career training or education. 4. Not thinking about taxes. Say it's proposed that one spouse keeps a $150,000 IRA and the other keeps a $150,000 taxable investment account. Sounds fair. But it's not. The owner of the IRA will have to pay taxes on that money when it's withdrawn, so the two accounts are not truly equal in value. 5. Only using a lawyer and an accountant. Hire a Certified Financial Planner™ professional trained in divorce financial issues to work alongside your attorney and CPA. A Certified Financial Planner™ can objectively examine long-range issues such as budgeting, appreciation, and tax ramifications of the proposed settlement assets; as well as the long-term costs associated with settlement proposals. A financial planner, working alongside your attorney and CPA, can help ensure the divorce settlement is financially fair to you. | |
| Category: Management | Added by: Antonio (09.08.2009) | |
| Views: 116 | Rating: 0.0/0 | |
| Total comments: 0 | |
