Divorce mistakes are more likely if your client opts for litigation rather than a collaborative divorce. Going to court encourages fighting, the stress of litigation makes it more likely your clients will be emotional, and lawyers control the divorce because court rules and procedures are complex. Common divorce mistakes include forgetting about taxes, allowing shadow advisors to influence your client, letting client’s emotions control decisions, not considering the liquidity of assets, not securing support payments with insurance, trying to hide assets, quitting work to get more support, not preparing for settlement or mediation, allowing your client to date during the divorce, letting your client use children as bargaining chips, letting a client get emotionally attached to assets, and neglecting post-divorce financial planning.
Tax Consequences. There are often hidden taxes associated with assets, such as a capital gain on appreciated stocks or penalties and taxes on early withdrawal of pension funds. Make certain your client understands these costs before accepting the asset in a settlement.
Shadow Advisors. Almost every client has family or friends who give him or her advice about the divorce. However, shadow advisors don’t know the law or the facts, so it’s important to insulate your client from their advisors during the divorce.
Client Emotions. Feelings run high during a divorce, especially if adultery or abuse is involved. However, divorce it not the time or place to get even. The goal of a collaborative divorce is to maximizes benefits for both spouses and develop a parenting plan that’s best for the children. Send your client to a counselor if they get emotional.
Asset Liquidity. Not all assets can be sold quickly; a second home or raw land can take months to sell. Moreover, pension plans trigger penalties and taxes if withdrawn early. Make certain your client receives assets that are easy to convert to cash.
Securing Support Payments. Alimony, child support, and other divorce payments must be secured by adequate insurance to make certain your client is protected if the ex-spouse becomes disabled or dies. Otherwise, he or she may have no income.
Hiding Assets. It’s important to establish good rapport with your client to ensure he or she discloses all assets. Trying to hide assets by transferring them to a friend or avoiding telling a spouse your client intends to relocate as soon as the divorce is final can have serious financial and legal consequences.
Lowering Income for More Support. Child support and alimony are determined mainly by client incomes. Some people think they can get more support if they quit working to lower their income. However, if a spouse is not working, seeking employment, or furthering his or her education, he or she risks receiving no spousal support in Texas.
Not Preparing for Settlement Negotiations. Just because your client opted for a collaborative divorce and you aren’t going to court, doesn’t mean you don’t need to prepare for settlement negotiations or mediation. You need a complete inventory and appraisement, including all liabilities, and a clear idea of what sort of parenting plan will work for your client and the children.
Dating During the Divorce. Clients often want to date before the settlement is final. However, few things make an estranged spouse so angry as seeing the parent of his or her children dating during the divorce. Advise your client not to date until the divorce is final because the spouse and children will resent it.
Using Children as Bargaining Chips. Divorce is hard enough for children without putting them in the middle of a divorce. Don’t allow your client to use the children as communications channels, threaten a custody fight to get a better financial settlement, or fight in front of the children.
Getting Attached to Assets. Never allow your client to become attached to the family home, a pension, or that painting he or she bought in Europe. Getting attached to an asset can create financial disaster. Make certain your client understands that assets are fungible and don’t let them get into a bad financial situation because they fell in love with their family home.
Post-Divorce Financial Planning. It’s essential to develop a post-divorce budget for your client so he or she knows whether to sell the family home. In addition, don’t forget to have your client change his or her will so the right people will inherit.
The most common mistakes attorneys and clients make during a divorce include not considering the tax consequences of the settlement, allowing family and friends to interfere with your client’s decisions, allowing emotions to dictate your client’s decisions, forgetting that your client may need cash after the divorce, not securing divorce payments with insurance, trying to hide facts or assets from the other side, quitting a job to get more child support or alimony, failing to prepare for settlement negotiations or mediation, dating during a divorce, putting the children in the middle of the divorce, getting emotionally attached to an assets, and neglecting post-divorce financial planning.