– Couples in the process of divorce tend to narrow their focus on the finish line to put an end to the pain, cost and burden that comes along with legally ending a marriage, but experts warn moving too fast too soon can lead to financial troubles down the road.
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“Don’t be penny-wise and pound foolish,” says family law attorney Randall Kessler of Kessler and Solomiany Family Law. “You don’t want to regret how fast you got out of the marriage.”
A hasty end to marriage may leave one or both parties wishing they were more cautious during the settlement process, he says, and taking the time and spending the money throught the proceedings may save more in the end.
FOXBusiness.com spoke to three divorce attorneys from across the country to get their top financial lessons from watching couples, and their cash, split up day in and out.
Randal Kessler, Kessler and Solomiany Family Law, Atlanta
Don’t lie. It may sound simple, but lying about both financial and non-financial issues will hurt your credibility later in the game, Kessler says.
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“If someone lies about cheating and then the court finds out you cheated, the judge won’t believe you later when you say you can only earn $100,000 a year,” he says. “Think about Bill Clinton, his lying bothers us more than his cheating.”
Transfer retirement accounts quickly. You will be able to break down your retirement account in divorce, but this is a separate filing that needs to be done with your 401(k) company, he says. “Too often people just want to be done with their divorce and never get to it. You can end up owing your ex money, or the recipient may be out of luck.”
Use a financial expert. If you have an estate or business that needs to be valued, get a professional to do it, recommends Kessler. Also spend money on a forensic accountant, in order to be clear on what you are dividing up in the divorce. “We are more often arguing about what we are dividing. It's worth spending the money to have someone figure out what there is to divide, otherwise, what are you fighting about?”
Ken Eiges, partner at Eiges & Eiges Law Offices, P.C., New York City
Choose the right time to start proceedings. Eiges says emotions aside, from a financial stance it is often hard to decide when to actually being the divorce process. Starting the filing freezes your assets, as well as business and estate valuations, from that point forward. “For example, if you have a business you expect to expand, you want to start your divorce as soon as possible, then your spouse won’t get as big a share of it,” he says.
Separate what you can. If you have something that you have obtained before a marriage and you want to keep it separate, you must do so before heading into divorce. “Don’t put that money or that estate into your name and your spouse’s name,” he says. “It becomes marital property and in the divorce it goes 50-50.”
Know the difference between alimony and child support. Parents who do not have sole custody of a child are only responsible to pay 17% of their income for child support, and it is not tax deductible, he says. Anything more than that, also known as alimony or “maintenance” money is deductible for you and shows up as income for your spouse. Put that base 17% toward support and the rest toward maintenance so you can deduct it on your taxes, Eiges says.
Nazanin Barouti, Barouti Law Corp., Southern California
Review your prenup. Before you are married, and even after you are married, Barouti suggests creating spousal agreements. “Specifically write down what will and won’t be shared,” she says. “When you first get married, you may not have had wealth, but you may acquire it afterwards.”
This will ensure things don’t get split down the middle if divorce is in your future.
Don’t change your will. You must change your will before applying for divorce, Barouti says. From the moment you apply on, it’s frozen depending on the asset in the will. If a trust is in your control, for example, you can change it post-filing, but if the will is community property you cannot.
Some states, like Georgia, will act as if your ex pre-deceases you if you die first and forget to change the will, leaving everything to him or her, Kessler says. Find out what the laws in your state are.