Divorce can seem overwhelming. There are a number of decisions to be made involving personal possessions, finances, and more. Even though every divorce is different, there are some common money mistakes that many divorcing people make. Below we discuss some of them.
HIDING SOME MONEY IN A “SECRET ACCOUNT”
Some people think it is a good idea to hide money in a secret account. This way, they reason, they will have a cash cushion when the divorce is final. Hiding money or assets, however, is a really, really bad idea. It is also against the law. In a divorce case, the parties, through their lawyers, must disclose all their assets and their debts. Withholding information from your divorce lawyer by failing to report all assets can result in criminal or civil contempt of court consequences. This means you may be ordered to pay a fine or spend some time in jail as a consequence for hiding money in a divorce case.
ENGAGING IN RETAIL THERAPY
Some people find spending money makes them feel good – or at least feel better. During a divorce case, some people feel compelled to buy a big ticket item like a car or a kitchen remodel. Other people spend less money but spend it more often, only to look up and realize they have charged a considerable sum to a credit card. Neither approach is a good idea during divorce. You cannot be certain how much money you will have after the divorce, so it is a good idea to keep your spending in check now. There will be time for that kitchen remodel or new tools after the divorce.
RELYING ON RETIREMENT ACCOUNTS TO PAY IMMEDIATE BILLS
Many retirement accounts allow for a withdrawal under certain circumstances. All too often, however, we see people withdrawing from their retirement accounts to pay a settlement or purchase something with the intention of paying it back, but without a solid plan to do so. In addition to tax consequences for removing money from a retirement account, there may also be penalties for doing so if you are under the age of 59 ½.
REPRESENTING THEMSELVES IN THE DIVORCE
Many people think they may be able to save money by handling their divorce themselves. While it is true they won’t have attorney’s fees up front, the cost of not having an experienced family law attorney on their side can be exponentially more. Before you decide to represent yourself, ask yourself these questions: (i) do I cut my own hair? (ii) do I work on my own car? (iii) would I do my own appendix operation? Probably not for any of them. Then why do you think you can handle your own divorce? Attorneys are highly trained, and most are highly skilled. We spend years honing our craft. Do you know what amount of parenting time you’re entitled to with your children? Do you know how to fill out a net worth statement? Do you know how to navigate the Majauskas formula to distribute a pension? We do! We understand the laws governing child custody and visitation, property division, the division of debts, allocation of retirement funds, and more. A highly skilled attorney saves you money in the long run.
If you are considering divorce, contact Frost & Kavanaugh to schedule a consultation. David Kavanaugh focuses his practice on family and divorce law. He can help you regardless of your situation. Call today at (518) 730-4222 to discuss your case.