Some Common Divorce Mistakes to Avoid
Most people going through a divorce are in uncharted territory. Almost everything that will happen will be uncertain and will be a matter of choices and consequences. For every move that is made there is a consequence. Sometimes the consequence alters the course of the future, sometimes it is hardly a blip. Knowing some of the more common mistakes to avoid, can help a Client achieve a better outcome, better settlement, and a better future.
Here are some common mistakes to avoid:
1. Building your case around one “thing” (the house, the RV, a Harley, collectibles, etc.)—If a divorcing party builds their case around one “thing”, often this leaves them at the end of the divorce with that one “thing”, but that is all they got. Instructing an attorney that they must keep the house, for example, is a common mistake clients think is a smart choice for their future. At least they will still have the home—so there is some continuity for them--and real estate is always a good investment, right? Think about it, though. They are not “investing”, they are divorcing. If the opposing party knows their spouse must keep the house, the house will become the target of all bargaining. They know their spouse will more likely give up assets and values to which they are entitled, simply to retain the home. Can they even afford to keep the home and buy the other side out? The amount of money they have to come up with to buy out a spouse often means giving up assets that would serve them well in the future, like retirement or investment accounts. Since the Court will balance all the assets as they are divided, keeping a house always means giving up other assets.
The power position in a divorce is the party that can part with anything. Take it or leave it—it just depends upon the finances and circumstances—not the emotions attached to the “thing”. Remember that in a divorce each person either ends up with the thing or the value of the thing. The smarter Client is okay with selling the house or having the other Party keep it and buying them out or they can keep it and buy out their spouse—if it is a smart financial decision. They are open to all the possibilities. This is because they know that in a divorce, for most situations cash is king. Tax free property transfers are a close second, but nothing beats cash for getting established and building a future. Liquid assets or ones that are easily liquidated without tax consequences can mean the difference between setting up a comfortable future or one filled with worry. There is nothing noble about being house poor and knowing the house was kept for the children—when what has actually happened is that keeping the house has introduced even more stress and uncertainty into the childrens’ lives. This is tough talk from an attorney, I know. But the financial considerations of a divorce are profoundly serious business, and options and choices need to be analyzed as if they are critical business decisions.
It is important to remember that each spouse is only half of the divorce equation and the other half is likely working against them—so neither may get all they originally wanted. It is not uncommon for someone to come into their attorney’s office and explain that they intend to keep the house or the RV or the collectibles and that is their #1 priority. It is also not uncommon to discover that keeping what they want is either impractical from a financial standpoint because they cannot afford the payments or cannot afford to buy out their spouse.
3. Leaving the Marital Home-when a divorcing spouse leaves the house and moves elsewhere during the divorce process, they often lose much of the control over what is happening with what is likely their most valuable asset. Not being present in the home means the opposing party has better access to realtors and house hunters and the opposing party can actually control the process. The condition of the house and the availability of the house for showing will all be in the control of the opposing party. If that person does not want the house to sell, they will find a way to interfere. The realtor will be told showings cannot occur or when they occur, there will be interference in the form of big messes, big dogs, gunshots on the property, locked doors, etc. Hostility toward the realtor or house hunters is not uncommon. What about all the marital property in the home? It will be doubly difficult for the absent party to retrieve their property and be certain it is safeguarded if they are not present. Also, whether deferred maintenance or updating the home is needed, will be entirely in the control of the other party. If they are trusted and confidence is high that the other party will always do the right thing, that is fine. However, such trust and confidence are often lacking between a couple that is divorcing.
4. Not understanding or preparing for tax consequences: A family law attorney is not a tax accountant, not a tax expert, not a tax attorney and not a financial advisor. They can usually provide basic advice and examples of how taxes might be affected by the choices and options available. However, having a team of professionals—experts in their field--to turn to while divorcing allows better decisions and fewer surprises. For example, if a couple are planning to sell a rental property they have owned for years, what will it mean for capital gains taxes and who will pay those taxes? What happens if one party wants to keep that property and continue to rent it out for additional income—will they be hit with a big tax bill when they sell the property?
5. Wanting Short Term Solutions for Long Term Issues: This mistake often means that someone going through a divorce “just wants it to be over”. They are willing to give up what they are owed, so they do not have to confront the matter. They might forgo valuing assets (“we’ll just call it even…”), negotiating a fair division (“we would have to go to Court, and I want to avoid that at all costs…”), or seeking their equitable share of the assets (“the other party will call me greedy and insult me like they have done for years…”) because they want the pain to stop. Sometimes it means allowing the other person to have an ill-advised custody schedule because they are afraid to challenge the other parent. They just want this pain to stop. However, the pain does not stop when the divorce becomes final. The pain is replaced with the horrible realization of what now exists and cannot be reversed. An unfair division of the assets, where one party is left with very little because they were not willing to fight for what they deserved, tends to chafe even more as the process ends. Living with what feels like injustice because the other side “won”—even with self-inflicted injustice-- festers to the point of bitterness. Regret might be a good motivator of what to not do in the future, but it rarely helps in a financial crisis. Failing to get a parenting plan right the first time because of a desire to avoid conflict, usually leads to years of continued conflict and misery as the issues were never properly addressed.
When someone is going through a divorce, they know that there will be disagreements. Rather than giving up so it can all be over earlier, they are better served with an attorney that will help them become strong enough to face the conflict. Providing information, education, options, strategies, straight talk, honest assessments and unlimited encouragement tailored to their Client’s unique situations is what a family law attorney should be doing. No-one wants to fight about everything in a divorce, but not picking and choosing battles wisely so it can be over sooner, only creates a future filled with regret.
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