Monday, September 22, 2008

5 Common Financial Mistakes in Divorce


1. Hanging onto the house at all costs.
Many couples scrambling to obtain a divorce settlement wish to keep the house at any cost. However, keeping the four bedroom marital home may be a financial undertaking that neither party can absorb in the post-divorce environment. Maintenance and child support to the recipient parent can help fund the mortgage and taxes, but some parties find that the burdens of keeping the marital home post-divorce outweigh the benefits, especially in this current home market/mortgage environment.

2. Failing to make a clean financial break.
Clean separation of assets and debts is another difficult task, but one that Howard Dvorkin, the founder of Consolidated Credit Counseling Services says is absolutely necessary, or the consequences can be devastating. Although the task may seem insurmountable, “the alternative is much worse,” says Dvorkin. “Having a spouse drive up your debt when you’re not married anymore” can seriously affect one’s credit score.

3. Counting on your ex to honor financial commitments.
Depending on your former spouse to comply with financial arrangements is also a huge mistake, according to this article. Although both parties in a divorce are beholden to a court-ordered divorce agreement, creditors are not bound by the terms of the divorce judgment. If your ex fails to pay on debts or loans, you may be hurt when applying for future financing.

4. Forgetting to change your will and beneficiary forms.
Wills and trusts can also be seriously impacted by divorce proceedings. Parties in divorce should separately seek counsel for the redrafting and execution of new estate plans, reflecting the wishes of the maker of the will and/or trust prior to the time of the divorce.

5. Overlooking taxes.
Finally, never forget which amount of money in your divorce settlement is maintenance, and which amount is child support. While child support payments are not taxable to the recipient, maintenance payments are.


Jon D. McLaughlin, Esq.
Cannell & Maulson, P.C.
211 West Jefferson Street
Bloomington, Illinois 61701
(309) 828-5600