Splitting up a life lived together is hard. After years of making financial decisions together, most families are a tangled mess of pre- and post-marital assets and debts. It’s no wonder that property division is a sticking point in so many divorce negotiations.
Every set of circumstances is unique, and yet I see enough couples make the same mistakes over and over. Would you like to learn from their experience? Then read on for three common (and expensive) missteps and how to avoid them.
Don’t let emotions drive the boat.
The cliché of Husband and Wife spending weeks in a fight over who gets a china set is not an imagined example. I have seen couple argue over trip mementos, couches and rugs. This is a big mistake, because a protracted fight can cost you more in professional fees than three china sets, a couch and a rug combined. My advice: before you pick a fight, do the math and be sure it’s worth it.
Understand your biggest assets.
Most divorcing couples mistakenly believe that their marital home is their biggest asset. Because of that belief, they put much effort and time into sorting out what will happen to the house. In reality, their biggest asset is probably the combination of their retirement and investment accounts. Sure, the residence is important, but don’t let it overshadow everything else that goes into determining your net worth as a couple. Think strategically: if your retirement accounts are worth twice as much as the house, you should be spending twice as much time on determining how to split them.
Invest in getting it right.
I know that divorce is expensive and that many couples are tempted to cut corners on professional fees. I understand that temptation, but I urge you to resist it. If your professional team recommends hiring a private investigator or a forensic accountant, think long and hard before you turn that idea down. You may regret not following their advice.
We like to think that we know our spouses, but many of my clients have been genuinely surprised by their significant other’s behavior during the divorce. The fact of life is that some spouses are tempted to hide assets. They may do it because they feel their soon-to-be-ex does not deserve his or her share. Some want to undervalue their financial baseline to argue for lower child expense payments. Others just want to deprive their spouse of the asset’s use or enjoyment.
Either way, hiding assets and lying about it is illegal. Assets can be hidden in more “traditional ways” like giving money away as a “gift” to a family member, or transferring valuable property to a friend. Some tricky spouses have gotten creative by hiding funds in anonymous digital currencies like bitcoin or creating shell off-shore corporations. If your accountant or attorney is noticing some red flags, consider investing in an investigation.
Getting property division right is a team effort.
Remember that splitting marital property is a challenging and complex process. It takes everyone’s participation, careful documentation and professional advice. The best thing you can do it get educated, do your homework and use your professional team. If something does not make sense, ask the question. If your attorney or CPA needs a bank statement or a title, make the time to dig it out. Finally, pick your battles. The china set may not be worth the fight, but getting a complete inventory of investment accounts definitely is!
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