In the twilight of a marriage when unhappy partners are contemplating divorce, psychological upheaval often overpowers financial common sense. Experts say some of the biggest mistakes divorcing couples make are emotionally charged choices.
One way some couples try to smooth the hard decisions of asset division, child support and alimony is to use mediation. Mediators can help couples reach settlements. How equitable those settlements actually are depends on the spouses. Being "fair" in order to sidestep unpleasantness is not always financially smart. Without the objective input of an attorney or financial advisor, short-term gain can equal a long-term loss.
If the decision to divorce is certain, financial planners recommend that couples begin the money split immediately. Many spouses fail to separate loans and credit cards and are shocked when a soon-to-be-ex adds debt or under pays bills before a settlement severs joint financial ties. This can be a problem because in the event of a divorce, any debt incurred during the marriage is considered joint property and must be split. Changing insurance and will beneficiaries is just as important.
Who stays in a marital home is a contentious point in many divorces. Experts say spouses, using the excuse that they don't want to disrupt the lives of the children, will cling to a family home even when they cannot afford it. In a post-divorce household, one spouse's income must take the place of two. As hard as it may be, money experts say considering a fresh living environment may be the best financial and emotional move.
The best divorce settlements include more than division of present assets. Plans for future changes should be part of a property agreement. A divorce plan with foresight, experts say, will lessen the chances that an ex will return to court to ask for support modification.
Source: WalletPop, "Getting Divorced or Separated? 7 Financial Mistakes Not to Make," Lynnette Khalfani-Cox, 9 June 2011