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How Planning Can Prevent Financial Mistakes in Your Divorce

Posted on in Property Division

How Planning Can Prevent Financial Mistakes in Your DivorceIt is vital to have a financial plan when you are creating a divorce agreement, including your budget for after the divorce and which assets you most need from your marriage. Your income as a single adult will be lower than what you had as a couple, and some expenses will become your sole responsibility to pay for. A smart divorce agreement will help you transition into a more stable financial situation. Conversely, a poorly planned agreement may leave you at a financial disadvantage. Here are three financial mistakes that can hurt you after your divorce:

  1. Overlooking the Cost of Real Estate: Marital homes and other real estate are among the most valuable properties in a divorce, but they are also among the most expensive to keep. Any residence or building that you own comes with property taxes, utility fees, and maintenance costs. Many homeowners are also still paying the mortgage on their house. Your home or other real properties may be worth keeping after your divorce, but you must include the related costs in your budget.
  2. Not Considering Growth Potential: There are multiple ways of calculating the value of marital properties. One way is to consider whether a property has the potential to increase or decrease in value over time. Common examples include businesses, financial investments, and collectibles. You may regret letting your spouse keep these properties based on their current value, only to watch them increase in value in a couple of years. However, there is also risk involved if properties do not increase in value at the projected rate or decrease in value. The marital properties that you keep in your divorce should be a mix of those with growth potential and value certainty.
  3. Taking Short-Term Gain at a Long-Term Cost: Your immediate financial concern during a divorce is how you will support yourself, but you should still consider your long-term financial goals. Your retirement plan is a good example. You can withdraw money from your plan in order to compensate your spouse for letting you keep a valuable marital property. However, you are taking away from the money you need to support yourself later in life and may incur fees or taxes for making an early withdrawal. The long-term value of some assets can be more important to you than the short-term benefits of selling them.

Contact a Barrington, Illinois, Divorce Lawyer

The division of property is more than trying to get the most valuable assets from your marriage. A Barrington, Illinois, divorce attorney at Joseph M. Lucas & Associates, LLC, will make sure you have a strategy when negotiating your agreement. To schedule a consultation, call 847-381-8700.

Source:

https://www.forbes.com/sites/davidrae/2018/10/25/divorce-financial-mistakes/#2ee9f4fa7eda

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