One of the most important issues in any divorce is how to divide the family’s assets and debts. There are some common mistakes that you should be aware of as your go through the divorce process:
One of the primary errors is not having a comprehensive understanding of your family’s current financial situation. If one spouse has been primarily responsible for managing finances, the other may be in the dark. To negotiate effectively, you need to take an inventory of all your family’s accounts, assets, debts, and sources of income.
Here in California, there are requirements for financial disclosure during the divorce. Key documents that must be disclosed include the statement of assets and debts and the income and expense declaration. To properly do this you need to gather necessary documents including tax returns, pay stubs, financial account statements, information about personal assets, and details about debts.
The rise of cryptocurrency has added complexity to identifying hidden assets. Running credit reports and obtaining Social Security benefit statements can help reveal publicly recorded debt. Additionally, analyzing money flows over several years can provide insights into fund usage and movement that can help to uncover these hidden assets and debts.
While you or your spouse’s social security benefits are not considered community property, an ex-spouse may have a right to a spousal benefit. You need to keep track of your spouse’s social security number and, in the case of a long-term marriage, explore potential spousal benefits, which could be 50% of the earning spouse’s benefit.
In California, pensions are often considered community property. Neglecting to address pensions and other retirement accounts during asset division can be a costly mistake. But you need to know that once you have agreed to divide those pensions and retirement accounts, the next step is to file a Qualified Domestic Relations Order (QDRO) with the court. Without an order from the court the pensions or retirement account administrator cannot release those funds to you.
Lastly, not considering the right approach to your divorce can be a significant financial misstep. While the traditional litigation model is common, opting for a more amicable approach, such as Mediation or Collaborative Divorce, can lead to better agreements without unnecessary legal expenses that often come from the litigation process.
Navigating a divorce requires a careful and informed approach to financial matters. By avoiding these common mistakes, you can expect to be in a better financial position as you move into your new post-divorce life.
Contact Financial Harmony, LLC
For more information regarding financial planning while going through a divorce, contact Kristine Rushing at (833) 340-2305 to schedule a free consultation. Financial Harmony is located at 7700 Irvine Center Drive, Irvine, CA 92618.