Divorces in equitable distribution states can be emotionally charged, and navigating the division of marital property adds another layer of complexity. While the concept of ''fair'' seems straightforward, mistakes during this process can leave you financially worse off. In this blog, we discuss some of the costly blunders you should avoid.
Misunderstanding Equitable Distribution
Equitable distribution doesn't always mean a 50/50 split. Courts consider factors like the length of the marriage, each spouse's contribution (financial and non-financial) to marital assets, and their current needs. Don't assume you'll automatically get half of everything – seek legal guidance to understand what ''fair'' means in your specific situation.
Lack of Transparency
Hiding assets is a recipe for disaster. Equitable distribution requires full disclosure of all marital property, including bank accounts, investments, and retirement funds. Trying to be sneaky will only hurt your credibility in court and potentially lead to penalties.
Undervaluing or Overvaluing Assets
Having an accurate assessment of your assets is crucial during property division. The primary reason is achieving an equitable split. Inaccuracies, whether intentional or not, can lead to one spouse receiving significantly less than their fair share. This can have serious financial consequences, especially when considering long-term security. Imagine a scenario where one spouse undervalues a business they own. The other spouse might unknowingly accept a smaller payout, leaving them financially strained after the divorce.
Accurate assessments also prevent future disputes. Disagreements over value can stall the entire process and lead to expensive court battles. Having documented valuations from professionals provides a neutral ground for discussions and fosters a more cooperative atmosphere.
Certain assets may require professional appraisals. Real estate, for example, should be assessed by a licensed appraiser to determine its fair market value. Similarly, valuable items like jewelry or artwork might need specialists to ensure accurate valuations. The cost of appraisals is often outweighed by the benefit of a fair and streamlined property division.
Ignoring Long-Term Costs
In the midst of dividing assets during a divorce, it's easy to get caught up in the current market value of things. But, a wise move is to look beyond the surface and consider the long-term costs associated with each asset. Here's why factoring in future expenses is crucial:
- Hidden upkeep. A seemingly attractive house might come with hefty property taxes, homeowners association fees, and ongoing maintenance costs. Similarly, a classic car might be a collector's dream, but keeping it running can be a financial burden.
- Liquidity matters. Not all assets are created equal when it comes to turning them into cash. While receiving a vacation cabin might seem nice, selling it quickly to access funds could be difficult. Cash or easily sold investments offer more flexibility.
- Considering future needs. If one spouse plans to retire soon, they might prioritize assets that generate income, like rental properties. On the other hand, someone starting a business might need assets that are easy to convert to cash for investment.
Failing to Consider Tax Implications
Property division can have tax consequences. You should consult with a financial advisor to understand how the settlement might affect your tax burden. For instance, selling a marital asset could trigger capital gains taxes. Proactive planning can minimize these financial hits.
Going it Alone
Emotions often cloud judgment during a divorce. Don't try to navigate property division alone. A qualified attorney experienced with property division cases can protect your rights, ensure a fair settlement, and guide you through the complexities of the process.
We Are Here to Help
At Matthew Penick Law, our attorneys can help you protect your assets. Backed by over a decade of experience, you can trust our attorneys to help you work to achieve a favorable outcome.
Learn more about how our firm can help you. Call (410) 618-0863.