Five financial mistakes divorcing women make
Divorce is emotionally difficult for all parties, but divorcing women tend to make financial mistakes that hurt them too. Sometimes they agree to terms just to end the challenging process, according to advisers who work with divorcing clients. Some of these slip-ups aren’t just made by women, but tend to be made by the spouse who earns less. And while it’s shifting, today that’s still often women.
Using children’s feelings in financial decisions
Women sometimes forgo taking their fair share of assets because they believe it will benefit their children. An example is one who puts off taking her 50% share of a family business because she doesn’t want to hinder its progress in case her kids want to work there one day. Other women agree to lower alimony payments to have those amounts put in 529 college savings plans for the children, but really that ends up leaving her with less for her own care — which is the point of alimony.
Underestimating household expenses
It’s pretty easy to estimate the cost of things like the mortgage, cable and utilities. But most people don’t really track spending very closely and underestimate what they pay for clothes, eating out, vacations, etc. They also may be under time pressure to deliver an estimate even though they don’t have access to the statements needed to come up with an accurate figure.
Failing to secure alimony, child support with insurance
Child or spousal support should be backed up with an insurance policy to protect the recipients in case of death or disability. Unlike with a spouse that just refuses to pay for support, there’s no way to recover funds that simply aren’t there.
Ignoring the impact of taxes
Analyzing the impact of taxes on all assets received as part of a divorce decree is important.. Understanding the penalties that will be owed if you have to cash out retirement funds early and the capital gains that will be due on investments is important to show the real value of assets one is gaining. Many women fail to make quarterly estimated tax payments on alimony, for instance, because they didn’t know they had to.
Keeping the family home
The expense of holding on to a pricey family home — including the mortgage, taxes and maintenance — is often more than anyone can predict, and giving up access to other financial assets for that property is often a financial mistake. It can end up stretching the recipient too far, when it would be financially best to sell the family home.
To expertly navigate the divorce landscape and pitfalls, contact the expert family law attorneys at Dworken & Bernstein to learn more and find out your options today!
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Sources: Robert Henderson, president of Lansdowne Wealth Management; Chris Chen, wealth strategist at Insight Financial Strategists; and Justin Reckers, chief executive of Wellspring Divorce Advisors – featured in Crain’s Wealth.
