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Common financial mistakes to avoid during divorce

Gig Harbor couples going through divorce would probably agree that property division is often complicated. Unfortunately, many divorcing spouses make errors that can have a severe financial effect after the divorce.

One of the most common mistakes is fighting to keep the family home at all costs. A separating spouse should keep the marital home only after weighing the pros and cons. A large house can be an expensive proposition when a separated spouse looks to refinance or maintain it. On the other hand, a large house can be a huge asset when money is needed. It is important to remember that if the real estate market is not healthy a house can become a liability.

Another common error is short-sightedness in financial planning for the future. For example, a spouse may choose to keep the marital home but in exchange, hand over a large part of the retirement accounts. That spouse may be exchanging their future financial security for a property which may or may not help that spouse financially in the future.

While planning what to ask for in a divorce, separating couples should always keep in mind the hidden costs of the future. For example, a separated spouse may receive a rental home in property division and then choose to sell it. However, after the sale the entire capital gain of the sale becomes taxable. In addition to the taxes, realtor fees and general sales expenses can also burn a significant hole in that spouse's pockets.

Finally, separating couples should understand that legal battles at the time of divorce often do more harm than good. It is a good idea to try to work out an amicable settlement whenever possible. An experienced divorce attorney can help a client through the negotiation process.

Source: USA Today, "5 biggest divorce mistakes financially," Wendy Spencer, March 7, 2015

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