Avoid these three common mistakes when it comes to divorce and finances
Finances are an important part of marriage, and divorce. According to at least two studies, one by TD Ameritrade and another published in the journal Family Relationships, disagreements about finances remain a leading cause of divorce in the United States. Those who are going into divorce already disagreeing about finances may find the property division portion of the divorce particularly difficult. Both parties can help better ensure they approach this portion wisely by avoiding these three common mistakes.
#1: Jumping to litigation
Litigation is likely the most well-known way to get a divorce. If you think of divorce and picture a courtroom battle between two parties, you are picturing traditional litigation. Although this option is best in certain situations, like when neither party can agree or if there are allegations of abuse, there are other options that can be more efficient and private.
Alternative dispute resolution (ADR) offers a non litigious route towards divorce. ADR options include mediation and arbitration. Both use a neutral third party to help guide negotiations and can result in an enforceable divorce settlement agreement. One of the key benefits over traditional litigation: the discussions can remain private. Litigation that occurs within a courtroom is often public, so those who go forward with litigation can have more difficulty keeping the details of the divorce private.
#2: Failing to get a good understanding of your assets
One of the first and most important steps when getting a divorce is to put together an inventory of assets. Some of these assets are subject to division, others are not. The details often depend on state law. California property law generally divides the assets into one of two categories: separate and community property. Community property is generally what is owned during the marriage and subject to division, while separate property is not. Common examples of separate property include gifts or inheritance. If these forms of property were kept separate, the court may not consider them for division as part of the divorce.
There are situations when the split is relatively easy. Perhaps the marriage was short or there are no children or only a few assets to take into account. In other cases, asset division is much more difficult. This includes when either party has business interests, significant assets, or multiple pieces of real estate.
#3: Not listening to counsel
If you chose to hire an attorney to help advocate for your interests during divorce, listen to their advice. A failure to promptly complete requested paperwork or provide needed documentation can make the entire process take longer than necessary. A longer divorce process can translate to a more expensive divorce. Having paperwork about assets organized not only helps to speed along the divorce process, but it can also ease your transition into post-divorce life as you will likely have a better grasp of your financial standing.
These are just a few of the financial matters to consider when moving through the property division portion of the divorce. Additional considerations can include the impact of taxes and the cost of children if they are present.