When children are involved, many divorcing couples in Michigan might try to have an amicable divorce to spare their children from additional hurt. However, in an effort to avoid disputes or upset the mood, they may overlook key issues in the division of marital property.
One couple recently experienced those consequences. The couple’s parting was amicable because they planned to continue jointly attending parent-teacher conferences. The man had also lost his job as an attorney and underwent a bankruptcy and foreclosure after the couple broke up. For that reason, the woman agreed to receive only 3 of the 5 years of alimony permissible under state law. Essentially, she gave up almost $30,000 over two years. When she developed colon cancer, however, the award proved insufficient.
Financial mistakes often occur precisely because both parties in a divorce are trying to be friendly. One such mistake is agreeing to give up cash or liquid assets in exchange for staying in the family house, believing the children will benefit from that continuity. In today’s housing market, however, any equity in a house may be depleted by its current market value (an underwater mortgage), and it may not be affordable to remain in the home.
Another mistake in amicable divorces may be avoiding the subject of which parent gets to claim the children as deductions on separate tax returns. In other cases, spouses may avoid asking for paperwork on retirement accounts or estate planning documents, fearing it may upset the amicable mood. Couples may also agree to wait to file for divorce until one spouse’s finances improve, so that alimony and child support awards will be greater. During the unofficial separation, however, the responsible spouse may fail to make any support payments.
Perhaps the biggest mistake made be couples trying to part amicably may be not using an attorney to determine issues like division of property, spousal and child support. Yet a formula proposed by an attorney might actually meet the least resistance in a divorce setting. In addition, an attorney can spot potential issues with IRAs, retirement accounts, stocks and capital gains that might otherwise be missed. If you are planning a divorce or legal separation, an attorney can ensure you are protected.
Source: Reuters, “Divorce mistakes you can make by being too nice,” Geoff Williams, June 26, 2012