Divorce: Financial Mistakes You Need to Avoid
Divorcing couples are always concerned about finances and how they will be divided. It is important for our clients to be in a conversation with us from day one in order for them to make good financial decisions. We can help them avoid financial mistakes and come up with the best plan that works for them. Each case plan is discussed and tailored to meet a client’s current and future financial needs.
Financial Mistakes to Avoid
Those going through a divorce often make financial mistakes because they do not understand the process. When we file the divorce petition, there are standing orders issued by the court that must be followed and that includes orders not to meddle with any assets. The standing orders are very detailed and lay out what is and what is not permissible during the divorce process. Some financial mistakes we have observed include, but are not limited to, the following:
- Closing financial accounts. A lot of people try to close out bank or other financial accounts. They may try to move money around and shift it from one account to another. They need to talk to an attorney to be sure they understand this is in violation of the standing order and cannot be done until property is classified as community property or separate property.
- Failing to consider tax consequences of asset division. We are not tax professionals, but we work closely with tax professionals who can advise them on the tax consequences of cashing out retirement plans, selling the family home, and other matters.
- Misclassifying assets. A common misconception of divorcing people is that if an asset is owned in one person’s name, it is that person’s separate property. In fact, it may be classified as community property that must be divided. This often comes as a shock to a person who expected their entire retirement account to belong solely to them, when it is likely community property if earned during the marriage and therefore must be divided.
- Insisting on staying in the family home. More common than not, the person who wants the house does not realize that this involves refinancing the home and getting a new mortgage in the sole name of the person wanting to stay in the house. The person must qualify for the loan by having income enough to afford it and to have good credit. If this is the case, and the person is unable to get a new loan, we can work with the person to come up with an alternative plan that will work for them.
There are many details that need to be discussed with a divorce attorney from the very beginning of your case so that you are fully aware of the Standing Orders, property characterization, and options available to you during your case to help meet your financial needs.
Meet and Plan with a Divorce Attorney
For more information on how we can help you through the divorce process and what your financial options may be, contact us at Martinez Legal, P.C. to schedule a consultation appointment.