Mistakes to Avoid When Dividing Assets in a Divorce
When you were a newlywed, divorce was the last thing on your mind, and now you’ve reached a point where you’re forced to think about your financial future. Dividing assets in a divorce is probably the most challenging part of the process. It’s an emotional and often gut-wrenching experience, and only a small number of lucky people get to have an easy divorce.
As it’s not something you’ve experienced before, it can be quite overwhelming and difficult. But we’re here to help you minimize the financial damage by pointing out the most common mistakes people make during this part of their divorce. Hopefully, we’ll be able to help you learn from their examples and not make the same errors.
Things to consider when dividing assets in a divorce
In an ideal world, you and your soon-to-be-ex-spouse would have worked together and had financial aspects of your divorce already sorted. However, in the real world, this rarely happens. This is actually the time when financial cheating is revealed, and a lot of tense situations occur.
Therefore, it’s best to be familiar with different factors that influence how assets are being shared, and usually, there’s three of them:
- Type of divorce – The uncontested divorce is the best option as it’s based on mutual agreement, and there is no need for a formal trial. In a contested divorce, there’s usually a lot of disagreements about critical areas such as property or children. If you can’t reach a suitable solution for both, the easiest and cheapest way to go is to have a divorce mediation.
- The kind of property you own – Separate property, for example, things you acquired before your marriage, will belong only to you. On the other hand, community property is everything you both acquired during your marriage. However, the division mostly depends on the state laws.
- The state you live in – State laws will determine how to share the property. In community property states, all marital property is either community or separate. However, there are states with equitable distribution laws. That means that assets gained during the marriage are divided fairly but not necessarily equally.
Mistakes to avoid when dividing assets in a divorce
Even though it might be hard to think clearly during such an emotional process, you should try your best to protect your interests. To help you prepare, here are the most common mistakes you should avoid.
Having a do-it-yourself divorce
A DIY divorce is all but a good idea. Unless you have knowledge and expertise, you should let professionals handle such complex legal and financial matters. As your future is at stake, you need to make sure to protect it.
By having professionals on your side, you can be sure you’ll get a fair result. Even in an amicable divorce, you should still have a CPA (Certified Public Accountant). They will make sure all assets are accounted for, properly valued, and fairly divided.
Rushing the process
Even though you or your partner already moved out of the family house and want each other out of your lives quickly, it’s best not to rush things. Rushing your divorce can lead to unfair asset division, especially for the more vulnerable spouse. The spouse in a stronger position can take advantage of the situation and leave the other party with much less than they deserve.
So, no matter how badly you want your ex out of your life, take your time and first make sure you are covered. Asset division is complex and takes time to be appropriately determined. Make sure to consult professionals and hire legal assistance. Don’t let yourself be pressured into signing an agreement that doesn’t give you as much as you deserve.
Refusing mediation or arbitration
Don’t dismiss alternative ways to sort out your divorces, such as mediation or arbitration. This will save you time, money, and stress, so you might as well give it a try. Also, this way, you’ll be able to keep your family matters private. If you end up in front of a judge, your personal dispute will enter public records. Therefore, going to court should always be your final option.
Not thinking about your post-divorce cash needs
Many couples fail to consider how much more expensive separate life is. This is especially true if your marriage had lasted a long time. It’s essential to take post-divorce finances into account and plan ahead. Try to figure out what your post-divorce life will look like. Whichever scenario you have in mind, you’ll need to try to get a reasonable cash cushion from your asset division.
For instance, many people underestimate or even forget the moving costs. As you want to have a move that is quick and affordable, you need to plan in advance. Therefore, do a thorough search and hire movers that will help you save money during the process. Also, don’t forget to take your future rent and utilities into consideration.
Not considering possible hidden assets
When dividing assets in a divorce, it’s not uncommon that spouses try to keep more than their fair share. This can be done through trusts, overseas accounts, or simply by giving money to family members and friends. If you suspect your soon-to-be-ex is doing something like this, consider hiring a forensic accountant.
There are also attorneys who specialize in finding hidden assets. They can help you ensure you don’t lose anything you’re entitled to. Also, they can obtain a court order requiring your spouse to provide documents related to their finances and assets.
The bottom line
Even though dividing assets in a divorce is a very turbulent and stressful part of the process, take a deep breath and remember that it’s almost finished. By making sure you’re thorough and avoiding mistakes we’ve listed above, you’ll ensure your financial safety and minimize the damage. Good luck!