People in Massachusetts may have seen a recent article about the financial mistakes people can make during a break-up The article rightfully stresses the importance of taking financial decisions seriously before and during a divorce since these financial choices can affect people for the rest of their lives. In a divorce, knowledge is power, and the more people know about their situation and how they are likely to stand afterward the dust settles, the better off they will be.
Perhaps the best way a person can start preparing for a divorce is by making sure that he or she has enough money set aside to hire a family law attorney and cover other expenses during the divorce. It is possible that a spouse will not be cooperative during this contentious time, which may make accessing the necessary assets a challenge. The article also recommends having a credit card or other line of credit in one’s own name just in case the need should arise.
People should also prepare by gathering important financial documents, including account statements, tax returns and other paperwork showing the existence and value of any assets that may be held as marital property. If a person suspects that a spouse is holding separate or secret assets, further investigation may be necessary.
It is also important for spouses to understand the tax consequences of a divorce-in particular, the implications of property division. Things like luxury cars and real property may have a high value at the time, but they are also taxed at a high rate that may make owning these items after a divorce problematic down the road. It may be better to get a share of an appreciating investment rather than a big-ticket illiquid asset.
Source: Forbes, “Three Types of Financial Mistakes Divorcing Women Make (And How to Avoid Them),” Jeff Landers, Nov. 27, 2012