Splitting assets in a divorce can frustrate couples. Not only are the issues complicated, but they create arguments and hurt feelings. This is especially true when you have large assets that you cannot easily divide. Even more, the complications can continue well after the divorce.
If you are getting a divorce, there are ways to avoid some of the problems you may encounter. When you know the pitfalls lurking in the process, you can find ways to avoid them. The following three mistakes can derail you when you are working on splitting assets.
1. Ignoring Tax Consequences
One surprise that many couples discover too late is that splitting assets impacts your taxes. Part of the issue is that divorce itself affects your taxes. Once it is final, you will no longer file a joint return, and your tax rate changes accordingly. Your income changes as well, so you may need to adjust withholding.
How you split assets complicates this even further. Depending on what you receive and how, the assets you receive could come with a future tax hit. This can dramatically impact the value of what you retain after the divorce.
The collaborative divorce process can help you navigate this issue. Instead of focusing on the fight over splitting assets, you will look at the overall picture. You both work with a financial neutral who will walk you through your finances and how the division of assets affects them. The more complete your understanding, the more easily you can avoid tax problems in your divorce.
2. Focusing on “Winning”
Collaborative divorce can also help you avoid becoming overly focused on winning. A contested divorce can lead too easily to a battle of wills. You see your spouse as the enemy, and splitting assets as a measure of winning or losing. The more you lock in on this, the harder it becomes to think about what is right for both of you.
Even in a collaborative divorce, each of you will have a lawyer focused on your best interests. The difference comes in the focus, which lies in getting to the best agreement for both of you. Instead of a zero-sum game that leaves you both bruised, it lets you come together and work out something that works for both of you.
3. Locking in on “Fairness”
You might think of fairness as a positive goal for your divorce. In many ways, it is. The problem comes when you focus on fairness as meaning a straight 50/50 division of assets, no matter what. You may have a few large assets–a home, a business, or retirement accounts–that make up the bulk of value among your assets. A 50/50 split, in this case, could require selling them off.
This “fair” result, though, could hurt you both. It means one of you loses a business, or both of you have to find new homes, at a time of personal upheaval. Splitting assets, in this case, may work better if you can find ways to keep these assets. You should focus on the deal that is right, rather than relying solely on math.
A collaborative divorce can help immensely in working around these pitfalls. When you work together, you don’t have to guess at your spouse’s needs or worries. You will communicate with each other and work with a team of professionals who all want you to reach the right agreement. If you are ready to discuss how collaborative divorce can work for you, contact Ogborne Law to learn more.
Engaging with an attorney to protect your family is never an easy step. Whether you need to protect your family from the unthinkable or restructure your family through collaborative divorce, we’re here to help. When you’re ready to schedule a consultation with Michelle Ogborne, please visit the scheduling page to get started.