You and your soon-to-be former spouse have laid your marital assets on the table and now it’s time to divvy up who gets what in your divorce. During this part of the divorce process — negotiating distribution of joint assets — be aware that any missteps you make can turn what could have been a fair settlement into one that puts you at financial risk. With the stakes this high, what traps should you be on the lookout for? Here’s how to avoid three common asset division mistakes.
Mistake #1: Your decision about your home is based on emotion, not financial reality. Some people dig in about the dividing the family home because they simply don’t want to feel uprooted — or they might be hesitant to initiate more change for their children. Others are emotionally attached to their home because they have invested so much time and work in it over the years. For most couples, the home is usually their most valuable joint marital asset.
With all this said, before making the decision to fight for the home in your distribution settlement, carefully consider how you will be able to financially manage not only the mortgage on a single budget, but also the upkeep and maintenance of the house. What if the roof leaks or the boiler stops working? Would you have enough liquid cash to pay for these kinds of major repairs? Will the need to maintain even home maintenance basics like having the driveway plowed in winter or the lawn mowed in summer siphon too much money from your overall family budget? Could you move to a less expensive home that is still in your children’s school district?
Bottom line: If your decision to attempt negotiation for full ownership of the family home is solely based on your emotional ties to the house, consider this a red flag to step back and evaluate how the house will fit in with your larger financial picture.
Mistake #2: Not Thinking Long-Term About Retirement. In a New Jersey divorce, most retirement and pension plans are subject to the state’s equitable distribution laws. However, if at the time a couple divorces, retirement is something still far off in the future, it can be easy to lose sight of the importance of retirement assets.
For example, if you decide to keep the house and the equity you have both built up in the home in exchange for giving up some substantially equal amount in a retirement plan account, you risk missing out on investment-return gains in your retirement accounts and you lose that amount of savings for your retirement and your future.
Bottom line: Be wary about using retirement accounts as a bargaining chip because giving up retirement assets could put you on less then firm financial footing as you grow older.
Mistake #3: You Hide Assets. Making the decision to hide assets may be one of the worst mistakes anyone can make during divorce. However tempting (or even easy) it might be to withhold information about hidden bank accounts or asset holdings you’ve kept secret from your spouse, carefully consider the ramifications of being caught. For example, if your spouse had to hire an auditor or forensic accountant to go through your joint finances, and hidden assets are discovered, you may be forced to pay this professional’s fees. Likewise, if your case ends up contested in court, be aware that judges tend not to look favorably on spouses who withheld assets that should rightfully be shared.
Bottom line: If you have assets that you want to protect, instead of hiding them and ultimately putting them (and you) at even greater risk, talk to a family law attorney about smart legal moves that can ensure the asset is divided as fairly as possible. Who knows? The money you save from not going through the legal headache that results when hidden assets are found may be enough to cover your spouse’s share of the asset in question.
Do you have questions or concerns about how marital assets will be divided in your divorce? Our attorneys are here to help. Please contact us to schedule an initial attorney consultation.