1. REAL ESTATE – KEEPING THE HOUSE
Have you watched the award-winning TV drama “The Good Wife” that revolves around a scandalized politician and his humiliated wife who leaves her comfortable suburban lifestyle to resume her legal career in order to take care of her family? The couple eventually sells the property as part of the divorce but in a plot twist later end up vying for buying the home again against each other when it comes back on the market. There’s the struggle of trying to arrange financing with not enough income or money for the down payment and the intra-family power struggle with the moneyed mother-in-law who is also trying to buy the home. There are the emotions of watching their kids growing up in the home mixed with the pain of the scandal and divorce.
You don’t have to be a high-powered couple to have this sort of drama even if it is on a different scale. One of the biggest mistakes that a divorcing couple makes is with real estate in general. For the majority of married couples in the Boston area and nationally, it is the biggest asset. It is tied up with all sorts of memories and emotions. Sometimes it becomes the symbol of power that one party uses like a club on the other.
In my experience working with divorcing couples in Massachusetts, this is the bottom line: Most divorcing couples make the mistake of keeping the house. Later, when it is too late, the spouse who ends up “winning” finds out it is a “winner’s curse” when he or she comes to realize that he can’t afford it.
2. BEING FINANCIALLY DISORGANIZED – I THOUGHT YOU PAID THE BILL
It is not uncommon for one person in the marriage to be the one who handles the household finances. Regardless of the excuse, one person may be more or less clueless about the financial details involved with running the household. Maybe that’s one of the reasons for the divorce in the first place but at this point ignorance will cost you.
When going through a divorce, you’ll need to disclose your financial situation in a financial statement required by the court. You’ll need to know where all that cash flow goes and you’ll be asked to provide details about things you probably haven’t even bothered to look at in a long time. Most folks are too busy to prepare or follow a budget or household spending plan but now you’ll need to know about payroll deductions, household expenses, transportation costs, daycare and related expenses for your kids.
Save yourself the time, money and aggravation and get copies of all your relevant papers. This includes credit card statements, recurring bills, mortgage details, work-related benefits, income taxes, pay stubs and statements for any investments, savings or retirement accounts.
While it is tempting to drop a box filled with papers on your attorney or mediator’s desk and have someone else sort through this, it will end up costing you now in the form of fees and later in the form of a poor settlement.
No one will care more about your money now or in the future but you so take the time to get organized. With proper information you and your financial team (accountant, financial planner) will be in a better position to evaluate your options and make a more informed decision.
3. USING YOUR BOSTON DIVORCE LAWYER AS YOUR FINANCIAL PLANNER
While your Boston divorce attorney may be an expert in the LAW, don’t expect them to be an expert in TAXES, INSURANCE, CREDIT, or RETIREMENT.
It is easy to simply rely on your attorney, but to properly protect your interests now and prepare you for the next stage of your life you really need expert guidance – the kind that can best be provided by professionals who are experts in their respective areas that will impact your future finances.
Though an experienced divorce attorney will know and have seen many things, there are nuances about your finances, taxes, future college funding or retirement that he is not prepared to help you answer. For most attorneys, life the rest of us, it is a matter of not having enough time. It is also about not having the specific skill set or tools to help with the analysis. Most attorneys do not have specialized training in taxes. Most do not offer tax preparation services that may keep them up to speed on some of these issues. And most will not have the specialized software to help with any tax or financial projections. And at upwards of $400 per hour, paying them or their staff for financial data entry and analysis can quickly run up massive legal bills.
4. SETTING UP AN UNREALISTIC HOUSEHOLD SPENDING PLAN
Whether or not you are organized, most folks tend to underestimate their actual cost of living expenses. Too much is at stake here and mistakes may lead to future bankruptcy. You’ll be “downsizing” into a one income household and you’ll need to be aware of the need to update your lifestyle as well. To regain the confidence and clarity needed for your post-divorce life, you’ll need to prepare by reviewing your current expenses and maybe getting the help and second opinion of a financial professional who can provide an experienced perspective.
5. UNCOORDINATED ADVICE MISSES THE ‘BIG PICTURE’
Rowers all need to be pulling in the same direction for the boat to move forward. Too often professionals and clients do not coordinate or collaborate resulting in differing advice. This potentially can lead to costly mistakes. Maybe the agreement failed to address how to split valuable tax losses from previous years. Maybe there is no mention about post-divorce life or disability insurance. Maybe there was no thought provided for how to best qualify for college financial aid. Maybe the credit card users haven’t been updated exposing a party to potentially higher credit liability and lower credit scores.
Consider asking your divorce attorney to be part of a coordinated team that collaborates directly with tax, financial, and insurance professionals so that the good advice you receive is actually implemented and everyone gets on the same page.
To learn more about Steven, view his Watchdog profile.