Ten Ways to Mitigate Financial Loss in Divorce

Top Ten Ways to Mitigate Financial Losses in Divorce

1. Do a cash/flow analysis (budget).

What is your new budget with your new income stream? Include potential or actual support payments. Consider the possibility of missed support payments if you are the recipient of support. Be realistic when relocating (can you really afford to keep the marital home?).

2. Identify all your assets/liabilities and know their actual value. 

For instance, a pension valuation will identify the approximate cash value of a pension, an appraisal will identify the actual value of home or commercial property. Is a business valuation necessary? Have you properly identified all assets you brought into the marriage and all inheritances? Once you've identified all your debts-- is bankruptcy an option? Once you've identified, be sure to disclose. Failure to disclose can result in penalties like forfeiture.

3. Engage your CPA at all times during your divorce. 

Can you negotiate your settlement to avoid paying taxes? Are you planning on withdrawing money from a retirement plan after your divorce? Are you filing your taxes and properly identifying all possible deductions after your divorce? 

4. Make sure all the assets are properly transferred as soon as feasible so that nothing falls through the cracks.

Can retirement assets be transferred prior to the entry of Judgment? Can deeds be drafted to be signed on date of entry of Judgment? Can accounts be closed prior to entry of the Judgment?

5. Hire professionals to save money. 

Hiring an attorney can save you tens of thousands of dollars in invaluable legal advise. Hire professionals who are licensed and insured where appropriate (for transferring and dividing retirement assets for instance). 

6. Determine whether paying out your property settlement ahead of schedule is financially and/or emotionally advantageous.

Is alimony in gross an option? Does your spouse need a down payment for a new house? Can you reduce your total liability by making a lump sum payment? 

7. Don't fall behind on payments.

Avoid unnecessary court costs and unnecessary attorney fees by paying your obligations on time.

8. Enforce the Judgment.

Has all the property been transferred? Has the house been refinanced out of your name? (Don't let your exes bad payment history ding your credit!) Has all the money been paid?

9. Seek modification of support payments the moment your circumstances change.

Job loss, income reduction, disability and other changes may all trigger a modification of support.  

10. Change your estate plan and re-name your beneficiaries on all your accounts when the divorce is finalized.

Although the judgment and state law say that the ex cannot collect, insurance companies will more than likely pay proceeds to the last named beneficiary and leave the battle for a probate court to decide. Best practices dictate to change beneficiaries on all financial accounts and revise the estate plan accordingly.