The economics of divorce can be complicated, especially if you and your soon-to-be ex-spouse are battling over sizeable assets. Legal costs tend to skyrocket if the process takes too long or if you do not know how to budget your resources.
Given the monetary requirements of divorce, it pays to be in the know and involved in every aspect. Otherwise, your financial health will be threatened. More importantly, you need to avoid some financial pitfalls during the process. Here are some of them.
Crossing Mediation or Collaborative Divorce Off the List
Expenses mainly depend on how you and your soon-to-be ex-spouse will approach the separation process. Litigated divorce, or the type that requires court appearances and a service of a combative attorney, is not the only way to settle things. If your soon-to-be ex-spouse agrees to a fair settlement, it would be wise to consider mediation or a collaborative divorce.
Overlooking Specific Costs
Some divorcing couples are too focused on the bigger picture that they forget the little things that make it up. These include the specific costs. Do not just put a definitive price tag on the entire case, as each segment and process requires different budgets. Law firms, such as MiddletonLawyers.com.au, suggest that you get a consultant or an advisor to figure out your expenses.
Ignoring Tax Matters
Before you agree to the settlement or the distribution of assets, look at the tax consequences. Lump sums and periodic alimonies have different ways of being taxed. Investments and assets, such as stocks, real estate properties, and businesses also have tax costs.
These are only some of the financial red flags you need to avoid in divorce. The most important thing you need to do is plan your finances before even go through the process. For safety, draft a post-divorce financial plan in case the agreement does not turn out the way you expect it.