There are many potential pitfalls when planning a divorce. One of the most hazardous to your personal well-being however is the financial booby traps that lay in wait for the divorcing duo. We've covered some before, but the Wall Street Journal's 'Six Costly Mistakes' brought up some we thought would be smart to highlight for you.
A Calm Divorce
In the heat of a divorce, it's very easy to let feelings get the best of you. This is doubly true when an arms race to smear the other spouse in an attempt to gain an upper hand in the proceedings — and a bigger check. But according to a story from Rose Swanger, a financial planner in Knoxville, Tenn., it might not always be the best route to take.
The woman already had gone through two lawyers and run up tens of thousands of dollars in legal fees by the time she consulted Ms. Swanger, and her husband had done the same. As the woman's legal bills grew, her credit score suffered, says Ms. Swanger, who ultimately dropped her as a client.
"I don't blame her for trying to retaliate, but I warned her that a calm divorce is the best divorce," Ms. Swanger says.
Don't Forget The Taxman
Remember that every dime that is going to be claimed in the divorce is going to be checked and double checked by the IRS. Monica Garver, a financial planner in Johnstown, Pa., says she worked on a case where the husband proposed a division of assets that amounted to a nearly even split of their face value. He proposed keeping $2 million that was in an after-tax investment account and giving his wife $2 million that was in tax-deferred retirement accounts.
"Each and every dollar [in the retirement accounts] had to pass through the hands of the taxman before the spouse could put it in her pocket," says Ms. Garver, who pushed to increase her client's share of the couple's assets to compensate.
Divorce and Money: Six Costly Mistakes (Wall Street Journal)
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