Divorce carries both emotional and financial tolls. The emotional stress of any family law matter makes most people upset and vulnerable to exploitation. The idea of a divorce may come as a shock to a divorcing party easier to exploit. For the non-filing spouse, divorce often comes as a shock. Most people do not have the ability to make sound financial decisions during this time. Retaining a Colorado divorce lawyer familiar with family law can help in avoiding costly mistakes. Below are a few important tips to avoid some of the most common mistakes:
1. Do not assume your spouse is going to be "fair" or "reasonable."
While a good divorce attorney will do their best to help encourage collaboration, sometimes this is not possible. While hoping for the best, it is important to prepare for the worst in the adversarial system. Preparation is your best tool overall, and will help your divorce attorney in evaluating your goals.
2. As soon as you feel your spouse may be considering separation or divorce, take steps to protect yourself.
Make copies of all important financial documents including bank accounts, credit card statements, credit reports, stock and insurance account statements, investment and business records, income documents such as tax returns, W-2s, 1099s, K-1s, safety deposit boxes and any information that relates to your lifestyle, such as charge account statements, proof of travel, entertainment or hobbies. Any expensive collectibles and supporting documentation is helpful.
- Open an account in your separate name with adequate funds to support yourself for 90 days – the time it may take to get before the court.
- A spouse may try to liquidate assets shortly before filing a divorce or legal separation. If a legal action for divorce or legal separation has not yet been filed, you may wish to consult a Colorado divorce lawyer regarding closing accounts to further charges. Cash in joint checking and brokerage accounts, home equity if in your spouse's sole name and cash value of life insurance policies is also vulnerable. Protect assets in advance.
- Inventory personal property. Take photos or videos before you move out.
- Keep a journal to remember important events. Memories fade with time.
3. Investigate what it will cost to live on your own.
In a divorce, most folks are taking the same income they used to use on one joint household and having to spread it amongst two separate households. Most people know how much they earn each month, but are less aware of how the money is spent. In fact, most people tend to underestimate expenses significantly. Take the time to write down everything you spend, from your morning cup of coffee to vacations, and develop a realistic monthly budget. The Colorado courts website has a good form you may use (Sworn Financial Statement) located at the following link: http://www.courts.state.co.us/Forms/Forms_List.cfm?Form_Type_ID=108. \Select JDF form 1111 and 111S.
4. Not all assets are created equal.
Don't assume it is best to keep the house. You cannot buy groceries with home equity! Be sure you can afford both the monthly payment and the upkeep. There are tax consequences relating to taking the marital home over retirement or other assets. To assure you are evaluating options to your best advantage, it is best to consult with an experienced family law attorney in Colorado.
5. Look at all assets and obligations before making decisions.
Financial decisions often affect one another through the interaction of interaction of taxes, capital gains, investment losses, timing issues, inflation, and more. A fair settlement begins by looking at a comprehensive picture of your finances and then determining suitable courses of action that work for you.
6. Have reasonable expectations.
Litigation is costly. Consider what it will cost to argue about an issue. If the argument will cost more in attorney's fees than it would cost to buy a new replacement item, it is time to reconsider your position.
7. Use insurance to secure obligations of support.
Understand that an ability to collect alimony (called "spousal maintenance" in Colorado) is only as good as your ex-spouse's ability to pay. The use of insurance policies is often a good way to help secure the obligation.
8. Don't overestimate the power of a divorce decree over creditors.
A Colorado court divorce decree may not be enforceable against Creditors. "Unsecured debt" consists primarily of credit card debt for most people. In most cases, if you incurred the debt during the marriage, it's a shared marital obligation no matter which spouse used the credit card. When you settle your divorce, responsibility for the debt is decided by the divorce court, usually without notice to creditors. Don't make the mistake of believing that a court order regarding division of debt is enforceable against the credit card company if the spouse obligated to pay the debt in the divorce fails ultimately fails to pay. Due to the risk of having credit card companies come back to collect an unpaid debt, the best practice is to pay off all the debts before the divorce becomes final, if possible.
9. Evaluate business, retirement and pension plans correctly.
Again, retirement benefits differ from plan to plan. For instance, plans vary about when the right to receive payment occurs or "vests", whether and how plan benefits may be divided in a divorce, how plan benefits are treated upon the death of a plan participant and/or former spouse and when benefits may be received by a non-participant former spouse. In some cases, the plan investments are under the control of the employer.
10. Follow up with retirement division orders.
Many retirement plans require a Qualified Domestic Relations Order (QDRO). The Qualified Domestic Relations Order (QDRO) is a legal document that sets out the details of the pension division and orders the plan administrator to pay part of the pension to the non-employee spouse. Even though it may be many years before the pension is payable, it's crucial that you get any required QDROs or division orders in place as part of the divorce, or you may lose important pension rights.
11. Consider mediation.
If assets and debt are moderate, joint parenting is workable and your spouse is agreeable to a fair settlement, mediation will save thousands of dollars in legal fees, emotional stress and will allow you to craft a plan that matches your own lifestyle. Mediation may not be useful if your spouse is hiding assets or income or is unwilling to consider the needs of the other.
12. Avoid hiring a combative lawyer as punishment.
This is a very bad idea for two reasons. First, except in the most egregious cases, divorce settlements are determined by equitable distribution laws and courts will not punish your ex-spouse financially for being a bad person. Second, the legal fees will be astronomical. It is your choice how you want to spend your precious assets, but most divorcing parties are happier keeping them in their own pocket. High divorce costs usually mean less money will be leftover for living at a time when funds are already being divided. Treating divorce as a business arrangement will help you to be better provided for post-divorce.
13. Don't forget the IRS.
Work together with a Colorado divorce attorney who is familiar with tax experts who work in the divorce area to minimize the total taxes you and your ex will pay during separation and after divorce and share the money you save. Cashing out the stock options only to get a huge and unexpected tax bill on capital gains later can be a disaster. Spousal maintenance is taxable to the recipient and deductible to the payor. (Child support is not tax deductible or claimable). Don't forget to plan for the taxes that you will owe on spousal maintenance.
14. Help your attorney help you.
Don't fail to communicate with your divorce lawyer. A lawyer cannot help you if you are not honest. The case will not go away if you ignore it. All cases have "good" and "bad" facts. A Colorado family law attorney can help you prepare for the "bad" facts. Show up and become involved in your case. You will know the details of your financial affairs better than your lawyer. He or she cannot help you "tell your story" to the judge. Organize your financial documents. Bringing in a lawn-sized bag of receipts will only cost you more in the long run.
15. Provide full disclosure.
Your divorce can be reopened for fraud if you fail to perform a full and honest disclosure of all assets and debts, including information material to an issue, pursuant to Colorado Rules. In addition to number 16 below, hiding assets is a sure fire way to make a judge or the opposing lawyer livid, in addition to adding to unneeded attorney fees.
16. Avoid flaunting a new lover, putting motel charges for rendezvous on joint credit cards, putting Victoria's Secret lingerie costs on joint credit cards, etc.
Enough said. This just makes everyone mad and is a sure-fire way to scuttle a divorce settlement and increase legal fees. Wait until the ink has dried and the decree entered.
17. Avoid making verbal agreements outside the settlement agreement.
Verbal agreements in family law matters in Colorado are not enforceable in many cases. Always reduce your agreement to a signed writing that is filed with and approved by the court.
18. Beware of taking legal advice from family and friends.
Family and friends provide well meaning emotional support but rarely know the law and usually obtain their information during casual conversation without knowing all the facts or circumstances. You should only get advice from someone who understands law and financial settlements. If you cannot afford full representation from a Colorado family law attorney, paying for an hour or two of their time can avoid costly mistakes later.
19. Refrain from having sex with your soon-to-be former spouse.
Again, bad idea. Holding onto emotional attachments makes everything more difficult and sends mixed messages to your spouse and/or children who are already struggling. Also, this could open up the possible argument by your spouse (in the event you also make mistake numbers 16 or 17 above) that you raped him or her or engaged in a form of emotional pressure.
20. Under no circumstances should you use your children as pawns.
This really should be number 1 and not number 20. Involving children in your controversy, asking them to convey messages to the other parent, or failing to protect their already frightened feelings not only shows lack of insight as a parent, it is another guaranteed way to increase litigation costs, prove you cannot co-parent and cause your children to suffer developmental delays and life-long emotional scars. Protect your children, remind them both parents love them and do not disparage your spouse in front of them. Children inherently know their DNA is 50% from each parent and therefore, if you say "Mom" is bad, that must mean they are bad, too.