Information Everyone Should Know About Divorce
As someone who regularly deals with divorce, I always feel a special need to help those who are about to go through that process or who have gone through it and are in the process of rebuilding. There are a few things that someone contemplating a divorce should consider:
1. Property Values and Budget. Each spouse should complete (separately, without comparing notes) a financial statement or net worth & budget worksheet. This will be an important part of any financial settlement and could help identify areas where spouses view things differently. If one spouse has an asset that is valued at $1000 and the other has it valued at $100,000, there is an obvious discrepancy here.
A resolution to that situation prior to a court hearing/trial can be a major cost saving and can also prevent delays and/or unfavorable outcomes. Similarly, if one spouse has an asset (such as an interest in a family-owned beach house) on their sheet and the other spouse does not, filling out this form can help reconcile the differences prior to mediation or litigation.
2. What about the Primary Residence? Often times the smart thing to do financially is to sell the house and for each of the parties to buy smaller homes in the same school district. This is based upon the fact that one household is less expensive to maintain than two households. A fact of the times seems to be that couples need to both work to maintain their preferred lifestyle. The costs of maintaining the marital household often times reflects the combination of both incomes.
If one spouse keeps the house, but both parties are responsible for the mortgage, there is problem. If one spouse keeps the house, then it is customary for the other to be given a period of time to refinance so as to remove the other spouse from the mortgage. However, sometimes the spouse can't get approved for refinancing on their own. So other spouse is stuck on the mortgage, and when mortgage payments are missed, both parties' credit scores take a big hit.
The house is usually the #1 financial obligation in most marriages, and having a well thought out game plan for what to do with it will save you from headaches down the road. Know what your current costs are and what your future costs will be if you move out of the existing house and either buy another home or rent a place. Americans spend a large percentage of their income on housing, so using a divorce as a way to downsize your housing costs can prove to be a spectacular long-term decision.
3. To Litigate or Mediate. We are all entitled to our opinions and our own decisions, but at times those decisions can be rather costly! If at all possible, working with a mediator along with your attorney can be far easier and less expensive than full-blown litigation. Having a conversation with your spouse (or soon-to-be-ex spouse) about this in a calm setting where you can make clear headed decisions can be a tremendous cost saver.
Either mediation or collaborative divorce can lead to a far friendlier, more positive and less expensive outcome than traditional divorces that go to litigation.
4. Future Expenses. This one sounds simple and maybe basic, but far too many people don’t know what the “day after the divorce” looks like. Using a net worth and budget worksheet to project what life looks like post-divorce will help guide some decisions about where to live, what expenses might need to be minimized, and if there are things that need to just flat out be eliminated. It’s tough to picture this, but it’s worth the effort.
Divorce is costly and not preparing in advance can only make it more so. If you are in the process of contemplating a divorce or are in the early stages, taking these steps could help you walk through the process with as little damage to your long-term goals as possible.
Bowman Law Firm