The decision to end your marriage may have caused you enormous grief and emotional pain. For many people, getting divorced rivals the death of a loved one in terms of the level of stress it causes. But once the decision has been made, your focus should be on mitigating its financial aftermath. That means keeping several things in mind when the time comes to negotiate a settlement.
Money is often one of the biggest challenges for divorcees. Some are left without adequate funds to pay their monthly bills. Others can pay their living expenses, but are left without money for the future. Still others fail to obtain a fair share of the marital property in their settlement.
Below, we’ll discuss 4 money-related factors to keep in mind when negotiating your settlement agreement. Not all of the following will apply to you. Those that do, however, can have a significant impact on your finances after your divorce is final.
#1 – Keep Or Ditch The Marital Home?
Many divorcing couples feel an emotional connection to their family home. They may have scrimped and saved together, making numerous sacrifices along the way, to purchase it after getting married. They may have raised their children in the house, creating countless fond memories over the years.
Some spouses are tempted to fight to keep the home. The idea of selling it brings them great sadness. But it’s important to remember that maintaining a house brings with it considerable expenses. Ask yourself whether you can afford to keep up with the mortgage payments and utilities. Will you be able to pay property taxes, HOA fees, and pay for major repairs, such as a new roof? Doing so may be difficult on a single income.
Most divorcing couples would be better off selling their home, paying off the mortgage, and splitting the proceeds. Doing so can prevent major financial headaches in the future.
#2 – Evaluate Your Investment Portfolio
Investments come in many flavors. From stocks, bonds, and mutual funds to options, real estate, gold, and private equity agreements, each carries a different degree of risk. Each one also comes with a different potential for return. When deciding which party should get which investments, you and your attorney should have a clear understanding of each investment’s risk and potential.
It is not enough to know the current market value of a particular investment. That value may quickly become irrelevant if the bottom drops out of the market for the underlying asset. Carefully evaluate each investment, including those in your retirement portfolio, before arriving at the negotiating table.
#3 – Dividing Assets Based On Their Market Value Is Unwise
It’s smart to consider an asset’s value when deciding which spouse should get the asset in the divorce settlement. Valuations are helpful in dividing property, investments, and other marital assets between the parties. If you own a piece of real estate that is worth $650,000, you would presumably relinquish ownership of it only if you receive $650,000 in concessions from your spouse.
But the market value of an asset is not enough. There are other factors that should play a role in how assets are divided.
For example, consider taxes. The sale of a large asset is likely to pose tax implications. The taxes due on the appreciation depend on the types of asset sold. Two assets of equal value may carry entirely different tax consequences. Your divorce attorney should be able to provide insight on this issue, and offer expert advice regarding your options.
#4 – Life Insurance On The Spouse Paying Support
Assuming one spouse is responsible for paying alimony or child support, it is a good idea to take out a life insurance policy on that person. In the event that he or she dies, the policy’s death benefit will help ensure that the recipient spouse and/or couple’s children will continue to receive financial support.
A question that often surfaces is who should be made the beneficiary on the life insurance policy: the surviving ex-spouse or the kids? Much depends on your circumstances. For that reason, this is a matter that should be discussed with your divorce lawyer.
Going through a divorce is stressful and emotionally draining. But it is important to remain focused on drafting a fair settlement agreement that prevents unnecessary financial hassles for you down the road. Consult an experienced family law attorney who can advise you and protect your legal rights.