A financial planner flags the costly errors women commonly make when a marriage breaks up.
Divorce, in my experience, is about two things: children and money.
The courts in most states typically will prioritize children’s interests first and foremost. Courts will also protect children’s entitlements by enforcing child support.
Unfortunately, there isn’t a comparable authority that protects a divorcing spouse’s financial needs. The law simply mandates a fair and reasonable financial outcome.
And beware: Dividing marital property is almost always a one-shot deal, for better or worse. Simply thinking that your outcome is unfair is not enough to try to reopen your judgment. To successfully appeal a division of property, you have to clear a very high bar: You have to prove that the divorce court made a mistake when considering the facts of the divorce or applying the divorce laws in your state to the case. Alternatively, you have to prove fraud or duress.
Over the course of years working with divorced and divorcing spouses, I’ve found some common financial mistakes that women make that threaten their financial security.
I’ve listed the mistakes here so you can be forewarned. Let me add a word of caution, though. It’s not enough to know that these issues can be a problem. You may feel as though you can handle them on your own. But with many of them, it is crucial you seek expert financial advice.
- Trading off part of the financial settlement you’re entitled to in exchange for securing child custody or greater visitation time.
- Underestimating your financial needs and assuming you can reduce your budget without consideration of the proportion of fixed overhead expenses.
- Believing in the “lawyer knows best” myth and letting your attorney dictate what your goals are and what your best short- and long-term outcomes are. You must be knowledgeable and responsible for your own financial security.
- Deciding financial issues one at a time and neglecting the interaction of factors such as income taxes, capital gains taxes, investment risk, inflation, and transferability of assets. All parts move like pieces in a puzzle and affect each other; they fall into place when you understand the comprehensive picture.
- Failing to adequately “insure” (that is, make enforceable) financial provisions of a settlement. If your spouse becomes disabled or dies, you may lose your support. You must protect your rights to your financial entitlements via life insurance on the payor.
- Failing to address unsecured debts or develop strategies for paying them off before your divorce is final. Unlike divorce — which is governed by state law — credit card debts and commercial loans are governed by federal law. Creditors do not care if your ex-spouse fails to pay off your debt as ordered in your settlement agreement. It is still your debt.
- Not planning, before the divorce is finalized, how to handle post-divorce financial issues such transferring pension benefits, securing health insurance, and changing ownership of accounts.
Vasileff received the Association of Divorce Financial Planners’ 2013 Pioneering Award for her public advocacy and leadership in the field of divorce financial planning. Vasileff is president emeritus of the ADFP and is a member of NAPFA, FPA, and IACP. She is president and founder of Divorce and Money Matters, serving clients nationwide from Greenwich, Conn. Her website is www.divorcematters.com.