Common financial errors to avoid in a divorce
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Common financial errors to avoid in a divorce

| Apr 22, 2020 | Firm News |

People in Michigan who are going through a divorce should try to avoid common costly mistakes that are often made at this time. For example, one error is failing to make a post-divorce budget. People often do not realize how much their lives are going to change when they are living separately on single incomes.

Failure to make a budget can lead to other financial miscalculations. For example, some people want to keep the family home because they have a sentimental attachment to it. However, this can be difficult or even impossible on a single income. There could be complications if the couple decides to sell the home as well. Depending on what it is worth, they may have to pay a capital gains tax. There might also be taxes associated with selling or splitting other property or investments.

Another common error is failing to revise estate planning documents after a divorce. This includes wills, trusts, powers of attorney and beneficiary designations. Finally, some people make the mistake of pursuing a divorce through the court system instead of trying to negotiate an agreement. While litigation may be necessary in some cases, it is not always required, and couples can save money through negotiation or mediation with the assistance of their attorneys.

Another advantage of negotiation is that it might give the couple the opportunity to work out creative solutions to dividing property. Instead of selling certain assets, dividing the proceeds and having to pay taxes on some of those sales, couples might instead agree that each person will keep assets of roughly equal value. It is important for them to calculate any costs associated with the asset when determining how they will carry out this split. For example, even a home that is paid for will still incur costs for utilities, insurance and property tax.