Thursday, September 18, 2008

What Not To Do In A Divorce

Sometimes, what you don't do in your divorce can be as important as, or even more important than, what you do. Here are some tips to make your divorce a little easier and to reduce the stress that is invariably part of this difficult process.

Don’t Get Caught Unprepared. If a divorce is on the horizon, you should make sure that you have copies of all of the important financial records from the marriage. These can include such things as bank and brokerage account statements, credit card bills, tax returns, and receipts. If you believe that your spouse may try to appropriate or dispose of assets such as the money in a joint bank account or the cash value of a life insurance policy, notify the holder in writing and, if necessary, get a restraining order from the court.

Don’t Try to Punish Your Spouse. Except in extremely egregious cases, divorce settlements are determined by equitable distribution laws. A court will not penalize your spouse financially or otherwise for being a nasty person. If you give you attorney orders to “go after” the other side, your legal fees will go through the roof. High divorce costs mean less money will be leftover for living. Treat divorce like the unwinding of a business arrangement. The best revenge is living well post-divorce.

Don’t Underestimate Your Budget. Invariably, clients underestimate or omit expenses when they produce their initial budget for temporary maintenance and later on find themselves unable to pay bills. Particularly, where children are involved, use a financial professional to help you produce an accurate and complete budget. The effects of inflation on the cost of a child's college education 15 years in the future or retirement 20 years hence, can be dramatic.

Don’t Ignore the Taxman. Work together with a financial planner or accountant to minimize the total taxes you and your ex will pay during separation and after divorce and share the money you save. The bottom line is you only get to share the marital assets left over after the taxman gets his cut.

Don’t Use Your Lawyer as a Therapist. One woman I spoke with ran up over $10,000 in legal fees in one month just in telephone calls complaining about her spouse. Attorneys are not cheap and billable hours pile up quickly. If you need emotional support, utilize qualified professionals and save big money in lawyer's fees.

Don’t Jump At A Settlement Offer That Looks Too Good. Both spouses and children must make compromises in their life styles after a divorce. One indisputable fact of divorce is that two households cost more to operate than one, but income is unchanged. A settlement that does not give one spouse enough money to live on is likely to go into default in the future. The result will be more litigation and legal fees. Where possible and appropriate, get payments up front even if you get less in total. Secure all payments with assets and insurance.

Don’t Forget to Update Estate Documents. After heavily contested divorces, many people forget to change the beneficiaries on their life insurance policies, IRA's and Will. The result is that their ex-spouse ends up inheriting their estate, which they really wanted to leave to their children, new partner or favorite charity.

Don’t Fail to Adequately Insure the Divorce Settlement. Premature death or disability of your ex-spouse can result in loss of maintenance, child support, college tuition or property settlement. Life and disability insurance can guarantee your payments and your family's security. Also, don't ignore the high cost of purchasing individual health insurance.