Divorce is one of the most stressful life events. Even the most amicable splits can be complicated and emotionally draining. It is also a time when financial decisions impact spouses and children for years to come. With everything a divorce involves, managing costly missteps is essential.
If you know anyone who is going through a divorce, here are some of the biggest mistakes they should try to avoid:
Mistake #1: Not Asking for Help Early in the Process
Most people think the first call should be to an attorney. While this may be appropriate, a financial professional can help provide guidance on assets, budgets, and other financial issues. At the same time, consider reaching out to other support groups that work with individuals or couples who are going through a divorce.
Mistake #2: Not Making the Right Move with the House
People often make mistakes when deciding what to do with the house after a divorce. Since the house is usually among your largest assets, it's critical to evaluate all your choices.
Mistake #3: Underestimating Your Post-Divorce Expenses
Maintaining two households can be more expensive than one, and some underestimate their post-divorce living expenses. You need to develop a solid, realistic budget before negotiating fair agreements about other items.
Mistake #4: Not Understanding That Everything Is Negotiable
In a divorce, consider putting everything on the table. Before agreeing to terms, negotiate issues, including paying for college, the children's cars, or other items that may not typically be in the agreement. When negotiating, one strategy is to start with assets with the highest value and work your way down.
Mistake #5: Not Having Life Insurance to Cover Alimony
If one spouse is supposed to receive alimony, child support, or some other financial payments after the divorce, the agreement may need to include a life insurance policy to cover the cost of the alimony in the event that the paying spouse dies.
Remember, several factors affect the cost and availability of life insurance, including age, health, and the type and amount of insurance purchased. Life insurance policies have expenses, including mortality and other charges. If a policy is surrendered prematurely, the policyholder may also pay surrender charges and face income tax implications. You should consider determining whether you are insurable before implementing a strategy involving life insurance. Any guarantees associated with a policy are dependent on the ability of the issuing insurance company to continue making claim payments.
We Are Here to Help
Divorce ranks as the second most stressful life event, so asking for help can provide valuable comfort and guidance throughout this challenging period. So don't go it alone; consider leveraging the expertise of professionals and other specialists. It may pay dividends for years to come.
Please share this information with anyone who might benefit from it.
1. Forbes.com, 2023
This material was developed and produced by FMG Suite to provide information on a topic that may be of interest. FMG Suite is not affiliated with the named broker-dealer, state- or SEC-registered investment advisory firm.