So-called “gray divorces” – affecting spouses 50 and older – have ticked up steadily over the past three decades while the overall divorce rate has declined. Experts cite many reasons for this, one being the ability of both spouses to financially survive the end of a marriage compared to previous generations.
But too many people make mistakes before and during the divorce process, which can cost them dearly later. The first and most important step is understanding your financial situation before filing the papers. Inventory all marital assets and income so you know what you are entitled to receive after the divorce is final. Here are three common financial mistakes and tips for avoiding them.
Not understanding your debt load
In Pennsylvania, marital assets and debts are “equitably” divided. Debts include credit cards, loans, mortgages or any account in your name. Creditors don’t care if your ex-spouse was responsible for the debt, but both of your names are on the account. They’ll hound both of you until they collect what’s owed.
The best way to address debt is to identify any potential issues before divorce, pay off joint accounts if possible or refinance balances so they become the responsibility of one spouse. It’s also essential to run a credit check. You may uncover other debts that you didn’t know about.
Dividing retirement assets
Pensions, 401(k)s, IRAs and other retirement assets can be complicated when dividing them equitably. After a home, retirement assets are typically the second-largest marital asset in a gray divorce. Not taking the proper steps can damage your retirement plans and create tax headaches.
Working with an experienced divorce attorney is not only advisable but smart to ensure that you receive your fair share. Knowledgeable lawyers also work with financial experts to evaluate your situation. Getting it right the first time is critical, as there are no second chances.
Valuing complex assets
Your attorney and financial advisor will also play a crucial role if your marital estate includes a family business, stocks or other hard-to-value assets, such as expensive artwork and collectibles. It’s essential to correctly value these assets and assess what you are entitled to and how you will be compensated. Understanding potential tax consequences alone can be overwhelming. That’s why it’s critical to work with knowledgeable professionals.