Number 1 May Shock You
Leslie Dawson, CPA, has seen first-hand the myriad financial faux pas of divorcing women. As a forensic investigative accountant, Dawson practices forensic accounting, the application of financial and accounting concepts in a manner useful to courts. That puts her up close and personal with the financial records of many a divorcee. Here is her list of the four biggest mistakes they make. Read on to learn how you can prevent the same errors in judgment as you navigate your own divorce.
1. Keeping the family residence.
“This is often an emotional issue with women, probably due to the kids. So, everybody jumps through hoops to arrange the deal where Wife gets the house,” says Dawson. “A year later, Wife realizes she cannot afford it and/or there are too many ghosts/memories and wants to sell the home. By taking Husband off the title at the time of the judgment, Wife has just lost the ability to use Husband’s $250,000 gain on the sale of a residence exclusion for taxes. This translates into approximately $60,000 more in tax that Wife will have to pay.”
Dawson suggests thinking long and hard about this decision. “See a financial planner and think about this. It is always very emotional, and in general, it is a matter of kind of sitting back and really looking at it from a real dollars and cents standpoint. Kids can adjust to a new home.”
2. Not realizing that lifestyles will take a hit after the divorce.
“You have had one pot of money supporting this lifestyle, you now are supporting two lifestyles and both are going to take a hit. You will need to adjust spending and understand that, it is not possible, in most cases, to continue living as you have been,” Dawson asserts. “Get a budget in place, and if you don’t know how, solicit the help of a CPA or financial planner or someone who can help run the numbers for you,” she advises.
3. The courts will expect you to be self-supporting at some point.
“You will not be able to live on spousal support until you die, unless there are other circumstances involved. At some point, it will end, and it is a really good idea to get a plan. Involve a vocational evaluator and find a career that would be good for you. Come up with a plan. Then go back to the court and say, I should be able to earn X amount of dollars in the future.”
“Taking the proactive approach helps on several levels,” says Dawson, “especially in court. If a woman can demonstrate that she is attempting to change things by becoming self-supporting, the court might reward that behavior and be more generous with support in the beginning potentially. It looks better if she is cooperating in the process and being an active participant in the future not sit back on her laurels, sooner the woman realizes that the better.”
4. Not knowing the numbers.
“Get copies of bank statements, credit cards, all tax returns — get a hold on what the finances are…document your joint lifestyle. Start educating yourself about the finances if you haven’t already. You have got to know where the money is, for starters, many women just don’t.”
