During a divorce, many men and women go through the emotional and financial trauma of
divorce. They are concerned about financial survival. When the property and the income will be
divided between the spouses, each of them will have only half of what they had before or maybe
even less than that.
Everyone undergoing a divorce faces certain common financial pitfalls. The financial pitfalls are
the unsuspected danger or the difficulty regarding the economic and financial situation of the
spouses going for a divorce. The common financial pitfalls that the parties undergoing divorce
faces are as follow:
- Not enough cash – In divorce, things always cost more and time seems longer than the expectations. As the divorce process starts, expenses will begin to grow. Starting from the legal fees, court costs, new living expenses and myriad other costs will drain the financial resources.
- Little preparation – Divorce is a complicated and long process which requires careful and good preparation for every situation and the consequences after it. People often lack in preparation for a divorce and end up having a trouble. Generally, they pack up their bags, load up the kids and drive away in a car that needs four new tires. They decide on having a divorce without any consultation with legal and financial professionals.
- No records – The most important asset during divorce is the documents which are the proofs. In most of the cases the wives do not possess a charge of any finances while they were married and because of which it causes her difficulty during the divorce procedure. As there are no records of those finances it may sometimes also cause a problem on the counterpart during the procedure to prove a certain subject.
- Overlooking assets – Sometimes small assets such as frequent flyer points and vacation pay can add up. Mostly these things are often overlooked thinking of them as not necessary. The parties overlook hobbies or side businesses that might use expensive equipment or generate income later. Even if they don’t want an asset, it can be used to trade for something in use.
- Ignorance of tax consequences – Though divorce is not a taxable event, it still can have tax consequences. If the parties owned their house for a number of years, it’s probably gone up in value and can be put on a sale so that each of them can claim the capital gain exclusion. Another huge asset in most divorces is the retirement plans. Most often the parties ignore these tax consequences.
- Ignorance is not bliss – In divorce, ignorance is not a bliss at all and if anyone does that it can result in being very expensive. The people carry on being a passive observer of their own divorce. They usually don’t take an active role in the negotiations which results in conflict and litigation after the divorce.
- Mixing money and emotions – It is obvious that in a divorce emotions will occupy place but it is wrong to mix money with emotions. During this trying time, it’s easy to confuse the feelings with the facts. The parties need to make themselves dispassionate and businesslike rather than being impassioned or emotional.
- Not taking control – Going through a divorce can sometimes make feel like a huge crisis at every turn. This time of upheaval should be used wisely by taking control of their life. In most cases, people are unable to take control and keep worrying in the dark. They cause them and the process of divorce harm and it sometimes has even more bed consequences.
- Not being ready for the worst – During divorce the people are not prepared mentally for the worst that can happen. There are certain situations which mostly the children, as well as the spouses, are not mentally prepared such as the children moving in with their parents, the loss of money during the court procedures, one of the spouses getting remarried and not willing to pay any support etc.
- Not developing a career – Many women put their careers aside to concentrate on their families. By doing this they lack in having a support financially as well lose faith and suffer from depression. They feel not being enough to go for a job or not possessing the required qualities for earning a livelihood.
Therefore looking at all the financial pitfalls of divorce it can be said that getting a divorce can
generate high levels of financial stress. A little bit of advanced financial planning before going
for a divorce goes a long way in the procedure of a divorce.
University Law College, Gauhati University