Most people understand that divorce will mean some challenging financial adjustments. After all, they will have to both cover the cost of the divorce itself and also split their property with their spouse. People often have to accept a temporary reduction in their standard of living during and after a divorce.
Therefore, it is common for people to plan very carefully to minimize the financial challenges that they will experience during a divorce. One of the most common practices employed by those preparing for divorce might actually lead to more challenges for them later in the process. How might someone’s divorce preparations lead to issues for them down the road?
A separate bank account isn’t really separate
Starting a personal bank account that does not have a spouse’s name on it is a common step taken by those preparing for divorce. They may slowly add funds to the account so that they have resources to pay for rent, cover insurance and buy groceries during their divorce.
Having a separate account isn’t necessarily problematic on its own, but the way people handle that account can be an issue. They will need to disclose the account to their spouse and the courts during the divorce, as it is marital property, not their separate property. The marital income used to fund the account could play into the property division process during divorce. If someone fails to disclose the account during litigation, that could look like an attempt to hide assets and might trigger penalties during the property division process.
Hiding and wasting assets can cause later complications
Some couples are able to very quickly settle property division matters during a divorce, but others will end up going to court. Those preparing for litigation are required to make a full disclosure of their financial resources. If their spouse can make claims that they hid or wasted marital assets, that can impact the outcome of the process. On the other hand, those who settle out of court, possibly in mediation, will likely spend much less in reaching their settlement and they can exchange information in a much more informal manner.
The steps someone takes while planning for divorce and also how they intend to resolve their divorce have a major role in the outcome of the process. Learning about and avoiding common property division mistakes can help people maximize what they retain and minimize their risks during an upcoming divorce.