Few would disagree that divorce is an emotional process. It is also a legal and financial process. For many couples who go through a divorce, there is a clear imbalance in the income and assets both parties are left with post-divorce. While some think that imbalance may be impossible to prevent, there are some financial mistakes that you can avoid making during a divorce. With that in mind, the Murfreesboro family lawyers at Bennett | Michael | Hornsby explain common financial mistakes people make in a divorce.
- Failing to understand that an equitable distribution of property does not always mean an equal distribution of property. Like many states, Tennessee is an “equitable distribution” state for the division of assets in a divorce. It is important to understand that equitable and equal are not the same thing. A court may start with a presumption of an equal split; however, numerous factors can influence the final division of assets.
- Not all assets are equal. In addition to not expecting an equal division of assets, you must also keep in mind that not all assets are equal. Assets that generate income, such as rental property may be worth more than their market value because they will continue to generate income in the future. Instead of focusing on negotiating an equal split, take the time to figure out which assets will be worth more in the long run. equal monetary value doesn’t always mean each spouse will receive a truly equal share of the assets over time.
- Making assumptions about the family home. While it would be nice to remain where you’re comfortable and avoid the hassles of moving, staying put might not be the best financial decision. The family home can also be an emotional issue for you, especially when children are involved. No matter how attached you are to your home, it’s critical to have a realistic sense of whether you can afford it. Remember that if you end up with the family home, you will likely be responsible for paying the mortgage and taxes as well as maintaining the home.
- Not requesting alimony. If you anticipate that your financial situation will be considerably changed for the worse after the divorce, requesting alimony only makes sense. Nevertheless, people often fail to do so out of embarrassment or because the other spouse talks them out of doing so. At least consider requesting alimony if you believe that your spouse will be able to pay it.
- Not including pension plans in the division of assets. A pension plan that is funded and controlled by the employer will pay a monthly income at retirement. While the beneficiary must wait until he/she is of retirement age to receive the money held in a pension plan, that plan has value today. That means that the spouse may be entitled to a share of that value.
- Not understanding the impact of a Qualified Domestic Relations Order (QDRO). A Qualified Domestic Relations Order (QDRO) is a legal document that reflects how you and your spouse have decided to divide a defined contribution plan, such as a 401(k) or a pension plan. A QDRO also orders the plan administrator to pay the non-employee spouse his or her agreed-upon or court-ordered share. The plan administrator cannot make such payments without a valid QDRO in place. Even if you’re dealing with a pension that may not be payable for several years, it’s crucial that you get the QDRO in place as part of your divorce, or you may lose important pension rights.
- Failing to consider your long-term financial security. Sometimes it seems easier to just get a divorce over with so you can move on with your life. This can lead to focusing only on your immediate post-divorce needs. That, in turn, could lead to significant assets being left on the table in the divorce. Five or ten years down the road you may regret not focusing more on your long-term financial security.
Contact Murfreesboro Family Lawyers
If you have questions or concerns about divorce in Tennessee, contact Murfreesboro family lawyers to discuss your options. Contact the team at Bennett | Michael | Hornsby as soon as possible by calling 615-898-1560 to schedule your free appointment.