Most people going through a divorce are in uncharted territory. Almost everything that will happen will be uncertain and will be a matter of choices and consequences. For every move that is made there is a consequence. Sometimes the consequence alters the course of the future, sometimes it is hardly a blip. Knowing some of the more common mistakes to avoid, can help a Client achieve a better outcome, better settlement and a better future.
Here are some common mistakes to avoid:
- Building your case around one “thing” (the house, the RV, a Harley, collectibles, etc.)—If a divorcing party builds their case around one “thing”, often this leaves them at the end of the divorce with that one “thing”, but that is all they got. Instructing an attorney that they must keep the house, for example, is a common mistake clients think is a smart choice for their future. At least they will still have the home—so there is some continuity for them–and real estate is always a good investment, right? Think about it, though. They are not “investing”, they are divorcing. If the opposing party knows their spouse must keep the house, the house will become the target of all bargaining. They know their spouse will more likely give up assets and values to which they are entitled, simply to retain the home. Can they even afford to keep the home and buy the other side out? The amount of money they have to come up with to buy out a spouse often means giving up assets that would serve them well in the future, like retirement or investment accounts. Since the Court will balance all the assets as they are divided, keeping a house always means giving up other assets.
The power position in a divorce is the party that can part with anything. Take it or leave it—it just depends upon the finances and circumstances—not the emotions attached to the “thing”. Remember that in a divorce each person either ends up with the thing or the value of the thing. The smarter Client is okay with selling the house or having the other Party keep it and buying them out or they can keep it and buy out their spouse—if it is a smart financial decision. They are open to all the possibilities. This is because they know that in a divorce, for most situations cash is king. Tax free property transfers are a close second, but nothing beats cash for getting established and building a future. Liquid assets or ones that are easily liquidated without tax consequences can mean the difference between setting up a comfortable future or one filled with worry. There is nothing noble about being house poor and knowing the house was kept for the children—when what has actually happened is that keeping the house has introduced even more stress and uncertainty into the childrens’ lives. This is tough talk from an attorney, I know. But the financial considerations of a divorce are profoundly serious business, and options and choices need to be analyzed as if they are critical business decisions.
- Rejecting options-If a divorcing party is not open to learn their options available in their case, this may mean they are too locked into only one way to achieve what they believe is success in the divorce. Understanding options is a strength in a divorce because it means more ways are available to achieve financial security. It sometimes feels overwhelming trying to choose from so many possibilities—but that is where the attorney comes in. The attorney should help their Client narrow the field of options by analyzing their financial situation and explaining the likely consequences of each choice. The Client can then choose what is right for them—or what is the best available option.
It is important to remember that each spouse is only half of the divorce equation and the other half is likely working against them—so neither may get all they originally wanted. It is not uncommon for someone to come into their attorney’s office and explain that they intend to keep the house or the RV or the collectibles and that is their #1 priority. It is also not uncommon to discover that keeping what they want is either impractical from a financial standpoint because they cannot afford the payments or cannot afford to buy out their spouse.
(to be continued…..)