People ready to move on from unsatisfying marriages can easily make choices during that process that put them at a disadvantage as they work to rebuild their lives. There are more opportunities for serious mistakes in high-asset divorces and also potentially more significant consequences for the people involved.
Individuals preparing to file for divorce after enjoying a comfortable marriage and those responding to a spouse’s filing need to avoid making any of the five mistakes explained below.
Accepting a settlement prematurely
The spouse who files for divorce typically has to submit a proposed property division settlement. Many people want to avoid conflict and may quickly accept proposed settlement terms without considering the long-term implications. People may agree to terms that are truly imbalanced and unfair if they do not review settlement proposals with someone familiar with community property laws.
Overlooking taxes and marital liabilities
Divorce comes with a variety of tax implications. The sale of assets could trigger capital gains taxes. The division of retirement accounts without appropriate procedures could lead to increased income tax liability. There are also considerations related to future tax returns, such as claiming dependent children. Spouses also need to talk about financial obligations or liabilities. People need to ensure that they include appropriate debts in the property division process and that they challenge the inclusion of debts that are not community property.
Trying to hide assets
People who do not want to share certain resources may try to hide those assets from their spouses and even from the courts as they prepare for divorce. Attempts to hide assets can trigger penalties during the property division process if the courts or the other spouse discover attempts to hide marital property.
Making key decisions without professional guidance
People preparing for high-asset divorces likely need the insight of multiple professionals. They may need to talk with an attorney and with an accountant who can help them start planning for their financial stability after the divorce. While negotiating to settle isn’t necessarily a poor decision, signing an agreement or otherwise formally committing to certain arrangements without the input of an attorney and possibly also an accountant can be a major mistake. People can deprive themselves of resources that they deserve and may set themselves up for highly-unfavorable and imbalanced property division terms.
Delaying final distributions
After the stress of the divorce process, spouses may put off some of the final steps required to settle the divorce entirely. For example, they may delay the creation and implementation of a qualified domestic relations order (QDRO). Those delays exposed spouses to increased risk of losses caused by economic volatility or by the misconduct of the other spouse.
Those preparing for complex, high-asset divorces typically need assistance to manage the process effectively, and that’s okay. Obtaining support as early as possible and avoiding common mistakes can help people protect themselves during a divorce.