Divorce is hard. There’s really no way around it. But there are some mistakes you can avoid that will make things a little bit easier should you find yourself headed in that direction. We spoke to financial advisors and attorneys in our area to find out what common blunders they’ve seen made—and how to avoid them yourself.
No. 1 Failing to plan ahead
No one goes into a marriage anticipating a divorce. But that’s not to say you shouldn’t do some things to protect yourself. Working with women in transition (widows, divorcees and those rejoining the workforce) is an area of expertise for Catherine B. Allen, a financial advisor with M Financial Planning Services. She says she has seen too many cases where one party—often the wife—has not established any credit history.
“Having a credit card in your own name is very important to build up your own credit and credit score,” Allen says. “You need to have some level of financial independence, even after you get married.”
Local attorney Andrew Rochester, partner with Morgenstern & Rochester, adds that failing to plan ahead also means filing for divorce in a spur of the moment decision—something he calls a very big mistake.
“The most important thing you can do before announcing a divorce is putting together the materials you will need—bank statements, credit card statements and tax paperwork are all incredibly important documents necessary to effectively litigate a divorce,” Rochester explains. “Oftentimes one party reacts to something that has happened, says they’re filing a divorce, and then those documents begin to disappear at the hand of the other party. It is very difficult for me to recreate a financial story of the marriage without those documents.”
Rochester recommends making photocopies of any important document and storing them all out of the house—at a friend or family member’s home—before filing for divorce.
No. 2 Ceasing all communication
Communication problems may have already been at the root of a marriage headed for divorce. But in the heat of things, ceasing all communication only makes the entire process much more difficult, says Bruce P. Matez, a divorce and family law attorney with Borger Matez.
“The biggest mistake is that people stop talking—or maybe never started talking—about the details of their divorce,” Matez says. “They ‘lawyer up,’ and start fighting immediately.”
All the fighting doesn’t actually get the process anywhere. So how can couples avoid this? “Hire a mediator,” Matez advises. “If not, hire attorneys who will immediately sit down and start the conversation about moving forward. This can be done even if someone files for divorce. Communication is key to working things out and keeping them from getting out of hand.”
No. 3 Choosing the wrong attorney
Choosing the wrong attorney can make an already difficult divorce even more challenging. It’s incredibly important to find an attorney who is the “right fit” for you.
“Some attorneys exacerbate already difficult and tense situations,” Matez says. “Some give their clients poor advice. Some give their clients false expectations. If it sounds too good to be true, it probably is.”
Matez advises not to necessarily go with someone who has told you exactly what you wanted to hear, makes you promises or appears definitive in what he or she says will be the end result. Attorneys simply cannot guarantee you anything and if they’re trying to, it should raise a red flag.
“The law is not black and white,” Matez says. “There is a lot of gray area and judges have a great deal of discretion. None of us really know what will ultimately happen. Choose wisely and carefully.”
No. 4 A lack of financial knowledge
It’s more common than not for one individual in the marriage to handle the bulk of the finances. No matter who it is, it can be a big mistake when one party doesn’t have any understanding of the family’s finances.
“Unfortunately in many of these cases there are hidden assets that the spouse knows nothing about and a forensic accountant has to get involved to look into assets that were not disclosed in the divorce proceedings,” says Allen.
“After a divorce it’s often tough for the non-income-earner to get a handle on things,” adds Stan Molotsky, president and CEO of SHM Financial Group. “In most relationships there tends to be one who is less financially astute and as a result, doesn’t get involved at all with the finances. However, even if you’re not the one who handles the finances, it’s important to still get a better understanding of them.”
A common mistake that Molotsky has seen is when the holder of an insurance policy fails to pay the premium— unbeknownst to the ex-spouse. If the policy holder dies, there are suddenly no funds available to the beneficiary. The ex-spouse and the kids are left in the lurch.
“Our advice is that the beneficiary of the policy is also the owner of the policy and therefore responsible for paying the premium,” Molotsky says. “That is sometimes against the advice of the individual’s attorney, however we believe it protects the family. If something happens to the policy owner, the funds will be available for the kids.”
No. 5 Letting emotions run the show
It’s very easy to let emotions overtake you before, during or after a divorce. But it’s important that you keep your head on straight.
“Think financially, not emotionally,” says Allen. “During a divorce there are going to be a range of emotions you may feel—anger, loneliness, guilt, vulnerability, depression or perhaps even relief. The key is to not allow emotion to overtake you to the point where you aren’t making good choices.”
Allen stresses the importance of having a conversation with an attorney, a CPA and a financial advisor—and maybe even having all three of those experts converse—in order to make sure you’re making the best decisions every step of the way.
A lot of bad decisions are made when one party fails to consult with an expert. It’s easy to think in the short-term when emotions are running their course but Allen says an attorney, a CPA and a financial advisor will help you make the best decisions for your future.
“I’ve had clients say, ‘I let him keep the 401k because I wanted the house,” Allen says. “You can’t retire on a house.”
Once a divorce is complete, Allen says it’s time to step up and take control.
“It’s all about you now,” she says. “Your life has changed but you need to move forward. It’s time to get off that emotional roller coaster and re-evaluate. You may need to change some of your spending and saving habits and to make adjustments to your portfolio. This is the time to consult with a financial advisor.”
Published (and copyrighted) in Suburban Family Magazine, Volume 7, Issue 3 (April, 2016).
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