Let’s face it, there are a few events that occur in life that can cause financial devastation. The death of a spouse, personal bankruptcy, major illness and, of course, divorce. But divorce does not need to create a financial hardship. In fact, it could actually result in a healthier financial position if it is handled properly. Some spouses find that divorce creates a clean financial separation and eliminates huge cash drains, especially for the higher income earner. Despite this, spouses who don’t get the proper legal and financial advice can make some foolish mistakes.
Here are the top 5 mistakes:
1. Not Being Prepared
Divorce doesn’t happen overnight. It is preceded by a long journey of sadness, anger, and uncertainty. There may be months of arguments or poor communication. There could be years of marriage counseling. There may have been past separations followed by attempts to reconcile. One of the most common mistakes that people make with their finances during divorce is not being prepared and waiting to address their financial issues way too late in the process. Divorce is a long and difficult process that begins well before the date of separation. So being prepared is crucial.
2. Not Having Sufficient Records
Divorce settlements are built on the facts. Facts come from the evidence. The evidence is drawn from the financial records. Collecting copies of your income tax returns, bank and investment accounts, credit card statements, wills and trusts, insurance policies and inventories, vehicle titles and registrations, and any other financial or legal documents will allow your lawyers and Chartered Accountant to advise you effectively. Make sure you get copies of this as soon as possible. This could be done with the camera on your phone, the use of a photocopier or a scanner. If in doubt, copy. The more records you have, the more data your advisers will have to help you.
3. Not Being Informed About Your Assets
Many spouses leave all their legal, financial and accounting responsibilities to the spouse who is more adept with math. This means that in all divorces, one-half of the spouses are less informed or totally uninformed about the family’s financial situation. You need to know exactly what assets and debts you own. Your own lawyer will be able to assist you in uncovering the details of your assets and debts.
4. Forgetting About Shared Debts
In the fear and anxiety leading up to the divorce, many people forget to consider the debts that they may have had with their spouse. But these debts have to be divided too. This is why the process is called equalization of net family property. It is also important to prevent greater damage after the decision is made to divorce. Joint credit cards and lines of credit could be accessed and increased by the other spouse, and this could be dangerous if not managed correctly.
5. Not Getting Help From an Experienced Divorce Lawyer
Perhaps one of the most critical mistakes that you could make in a divorce is not getting legal representation from a skilled and knowledgeable divorce lawyer. Fortunately, there are many very good divorce lawyers in Toronto. In fact, the Law Society of Ontario publishes the names of each lawyer who has been certified as a specialist in family law here. If there is ever a time to ensure that you get expert and skilled advice, it is in the early stages of separation when it is most common for mistakes to be made.