Most of us have heard the old story about a friend or relative saying they’ve been taken to the cleaners by their ex-spouse after a divorce. Well, it doesn’t matter if you have a financial advisor and divorce amicably through a negotiated settlement and terms, or it goes through court. There’s still plenty of common mistakes you can make that will end up shafting you in the long run. And, sometimes divorce attorneys won’t say a thing about it, because at the end of the day they are still getting paid (all the more reason to find a reputable and trustworthy Denver divorce lawyer).
Unfortunately, during a divorce many people just want to check out and not spend any time thinking about the outcome of their divorce. The bottom line is, you are actually your best advocate, so please pay attention to the following advice we’re about to give!
Top 5 Financial Mistakes to Avoid During a Divorce
Here’s five financial mistakes to avoid, if you are going to get a divorce:
- Staying in A House You Can’t Afford – A lot of times there’s pride and principle involved in the divorce, and many of those getting a divorce view keeping the house as a victory. Well, if you can afford the mortgage, you might be right. But, now that you’ll be a single payer, and your monthly household income has been cut by 50 percent or more, will you still be able to pay a large monthly mortgage? What a lot people don’t realize is that, while there use to be enough money for additional or routine maintenance costs, there are now two households being footed by only one person’s income for each.
- Choosing A House Over Liquid Assets – Again, the mentality that keeping the house means winning isn’t always the case. So, if the offer is made to take the house, when your ex will instead get other assets and investments, such as gold and precious metals, a retirement account, or a brokerage account valued at the same amount as the house, then you should reconsider. Even though the value may look the same on paper, you need to consider the depreciation value of the property, maintenance costs, and other factors that make it not an even trade.
- Choosing Retirement Accounts Over Checking or Saving Accounts – This is another situation where it pays to have your thinking cap on. Let’s say you have roughly $50K in the checking and savings, and you also have a 401(k) account with the same amount. Don’t get suckered into taking keeping the 401(k) only, because what isn’t always apparent are the tax implications of liquidating or cashing out part of the account early. Meanwhile, let’s say your ex gets the checking and savings, which aren’t taxed when making withdrawals. See the downside of this asset trade? A 401(k) gets taxed like income to the account holder.
- Not Getting a QDRO to Access an Ex-Spouse’s 401(k) – If you take over an ex-spouse’s 401(k), or even a portion of it, then you are required to get a qualified domestic relations order (QDRO) in order to get access to the money in the account. The QDRO, which is a court order, must get approval through the 401(k)-retirement plan, before you can tap into it and make any withdraws. On the bright side, the QDRO route is one of the few exceptions that allows you to make withdraws without being penalized with a 10 percent early withdraw fee. However, it is still subject to being taxed as income, unless you roll it over into something else, like a CD, within 60 days.
- Not Covering Your Ex with Life Insurance – This almost sounds like a joke, but it’s not. If you receive a good deal of financial support in the form of alimony and child support, can you still afford all your bills should something suddenly catastrophically take them out? If you take out a policy on that person, and make yourself the beneficiary and owner of the policy, you should avoid any possible financial shortfall should your ex unexpectedly pass away. It’s probably best to get this one started from the outset, so you don’t even miss the amount designated for the insurance policy premium.
Contact a Denver Divorce Lawyer at Katherine Grier, P.C.
Do you want a divorce that will leave you feeling like you lost everything including the shirt off your back, or one that gives you a bright future? If you want positive, encouraging, and professional representation, then contact the Denver Divorce Lawyer at Katherine Grier, P.C. Since 1999, our attorney and her knowledgeable staff have been protecting clients’ rights, while guiding people through the complexities of the legal process. Whether you have a high net worth to protect or just need an experienced advocate to watch out for your best interests, our Denver divorce lawyer will listen to your concerns and aggressively protect your standard of living.
You can reach us by calling (303) 539-5435 or by sending us an email using the contact form on this page.