While divorce is an extremely emotional period, both parties must be very careful in planning for his, her, and the children’s financial well-being. As financial advisers, we see two main concerns when couples are getting a divorce: titling of assets and the cost of litigation.
Often divorce decrees allow one spouse to keep the family home, paying the mortgage and upkeep, and then, generally, sell the house within five years, splitting the proceeds. While this compromise generally works out, it can cause problems if the spouse responsible for the home cannot make the payments. If the mortgage remains in both spouses’ names, the spouse who did not keep the house can be liable for late mortgage payments, potentially destroying his or her credit rating. We suggest people in this situation talk to the divorce attorney used to see what actions can be taken.
This brings up an area of divorce that is often overlooked, which is titling of assets. We suggest moving all debts, such as homes, autos, credit cards, into separate names prior to the divorce being finalized. This means refinancing a house in one person’s name. To get one spouse’s name off the mortgage, it is generally considered a refinance. Unfortunately, with the current job market and the number of homes that have negative equity, this can be difficult. Couples can use other assets to help refinance; however, if retirement funds are used, this can have negative long-term effects.
Another common concern is the cost of a litigated divorce. Litigated divorces where couples have significant assets or complicated issues can cost as much as $100,000. Fortunately, there is a new approach in the divorce field known as Collaborative Law. It aims at settling cases through teamwork among specialists in various fields, such as, psychotherapy, financial, and legal, and even the use of a child specialist.
The cost of this approach should be much less, and the results can often times be much better, since both parties are forced to work through the issues together. Couples who are interested in this approach should contact an attorney who is trained in the collaborative law field. In Georgia, couples can find mediators trained in this field by searching the website of the Collaborative Law Institute of Georgia at http://www.collaborativepracticega.com. We also suggest divorcing couples consider working with a Certified Divorce Financial Analyst to help with the division of the assets.