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What Financial Considerations Come with Divorce?
Posted By Miranda Marquit On 09/11/2013 @ 8:30 am In Family | 2 Comments
Divorce is rarely easy. Not only are there emotional difficulties to deal with, but finances often come into play as well. “In general,” says Rick Vincent, a specialist with Investors Capital Corp., “divorce  results in a poorer person.”
By the time you split up the assets, pay the lawyers, and take care of court fees and other costs, chances are that you will be out a few thousand dollars. In some cases, it can take years to financially recover from a divorce.
“The biggest problems my clients face are the loss of homes and the difficult of transferring retirement accounts,” says Vincent.
While it’s a nice thought that a married couple can split everything  down the middle, or decide to abide by a prenuptial agreement, the reality is usually far messier. Even with a prenuptial agreement, there can be complications, since what happens after the agreement takes place may not be properly covered in the original document.
Vincent says that dealing with the house can be a huge hassle. “In many cases, the house is lost because it is sold, or the spouse keeping the house cannot afford it.” When children are involved, Vincent says this state of affairs can be especially distressing, since it takes away a safe place – just when the child needs some sort of stability the most.
He also points out that figuring out how to split up retirement accounts can be difficult. “With retirement accounts, especially 401(k)s , a qualified domestic relations order is required to access the funds,” Vincent says.
Even when you own the account, your spouse might still have rights to some of the funds. This is especially true if your spouse stayed home to raise the kids while you worked, and has no retirement account of his or her own. The reality is that those assets might be considered “shared,” even if the account is in your name.
And, of course, there are the attorney fees. Virginia Colin, Ph.D., is a Professional Family Mediator certified by the Viriginia Supreme Court. “Couples with large estates often spend $25,000 to $60,000 each on attorney fees,” she says. Even in smaller cases, it can cost each person $3,000 or more to settle things.
Colin says that a well-qualified family mediator can help settle matters for a little bit less. “Because the attorneys have to talk with you and your ex in addition to talking with each other, it is likely to take them more hours to reach an acceptable settlement,” she points out.
If you are paying $300 an hour, that can start to add up. A mediator helps you come to an agreement by working with you both. “You can find a well-qualified, certified, experienced family mediator for $150 an hour,” she says.
For divorces that you don’t want to get ugly, a mediator can help. “How much of the value of your assets will stay somewhere in your family, where your children might eventually benefit from it?” Colin asks. “How much of it will you and your ex-to-be give to attorneys?”
The financial consequences of divorce can be far-reaching. It’s best to do what you can to protect your assets, and try to find common ground with your ex if possible.
(Photo: Roland Tanglao )
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