Divorces are — at best — hard for everyone involved. At worst, they are something akin to emotional and financial armageddon. And one of the reasons why divorce can be such a huge financial drag is because it’s so intensely emotional.
Sheera Gefen, a divorce attorney in New York, says a big mistake people make in the divorce process is that they “think emotionally – which is not financially practical.” Some of Gefen’s clients even come to resent it when she questions the lengths they’re willing to go to get a certain concession from their spouse. “Is it worth spending all this money, say, fighting for custody of your kids, when at the end of the day you’re the one making most of the decisions and they spend most of their time with you anyway?’” she says.
Gefen says she’s there to listen to her clients if they need to vent or cry – “I have a box of tissues on my desk” – but in order to be a good attorney, she has to be emotionally detached.
Oftentimes Gefen’s job is to undo the mistakes her clients enter her office with.
Here are some of the mistakes she has seen too much of, and tips for how to make the divorce process go a little smoother and less financially devastating.
People don’t know enough about their spouse’s finances
Before you can start negotiating the division of marital assets, both spouses should know what assets the other has. Whether it’s a retirement account, bank account, pension or cabin in the woods, there are too many people in the dark about their spouse’s finances, Gefen says. (Marital property includes the money you and your spouse earned during the marriage, including things you purchased with that money.)
“I have clients who co-own property and assets — including real estate and stocks – and yet they don’t know how much the mortgage is on the property, the value of the stock, or even how much money is in their bank accounts,” Gefen says. This kind of ignorance makes a lawyer’s job difficult. In a contested divorce, soon after one spouse files for divorce, the couple exchanges “statements of net worth,” in which they disclose all financial assets and liabilities. But people are not always honest, and a lawyer might have to go an extra step to get authorizations to access the other spouse’s financials, including retirement accounts and bank accounts.
A fancy lawyer may not be the way to go
Some people think hiring a fancy lawyer and being litigious at the outset is an effective strategy. But the system will automatically generate more work for the attorneys the minute you make your first filing: “You can start to see motions requesting immediate relief, such as child support and maintenance or applications for payment of your spouse’s counsel fees. It can have a snowball effect… and thousands of dollars later, someone realizes, ‘uh oh, what have I done?’,” Gefen says. Even a court appearance can be costly. Taking such an aggressive stance can be a mistake in the beginning, and it can cause undue tension and diminish the prospect of an amicable resolution, she says.
Sometimes it’s better to start things amicably and have cooperative discussions than running to the courthouse to file for divorce. If the parties are willing to work together and conduct civil discussions with the help of a neutral third party, mediation can be a more efficient method. It can be cheaper overall and resolve the divorce quickly and efficiently.
Is it the ‘right’ time to get divorced?
Some people are in a rush to make it official, but Gefen says, there are many financial matters to consider, which makes it important to speak with a divorce attorney or financial adviser to figure out what the ramifications are for filing for divorce now vs. later. This comes into play when dealing with “equitable distribution of assets and liabilities.”
For example, if you and your spouse own your house together (you’re both on the deed and mortgage), shortly after the divorce is commenced, your house will likely need to be appraised for its “fair market value” at some point during the divorce process. Once the value is assessed, the outstanding mortgages and loans on the property are deducted from that figure to determine the amount of equity remaining in the home. The couple then has to make a decision: Should one party buy out the other’s share of the home’s equity (through refinancing or otherwise), or should the house be listed on the market for sale to pay off the mortgage and split the proceeds?
Before even filing for divorce, Gefen says a couple should consider how comfortable they are with the housing market at the time. If you’re buying out your spouse’s share, your spouse’s attorney would insist he or she be removed from the mortgage — and one way to do that is to refinance the mortgage in your own name. In that case you’ll want to consider interest rates and whether it’s a good time to refinance. If you think your spouse will want to “force a sale” of the house and you know it’s not a good seller’s market now, it may be worthwhile to wait to file for divorce, assuming no other circumstances are preventing you from waiting, Gefen says.
“The laws allow for one bite at the apple in divorce,” she says. Likewise, if you know your spouse is due for a bonus or other windfall in the next few months, and you think you could stick it out for a bit longer, you may strategically want to put off initiating the divorce to ensure that future asset will be deemed “marital” and subject to equitable distribution, says Gefen.
You want to vent? You’ll have to pay
Lawyers get paid by the hour, and one surefire way of racking up bills is to spend too much time venting. Your attorney charges you for all communications – emails, phone calls, meetings. One of the quickest ways to rack up legal fees is to spend a lot of time complaining to your lawyer or legal team about your husband or wife or the divorce process itself. It’s common to spend time discussing the emotional aspects of the divorce – divorce is an incredibly stressful time – but, says Gefen, it’s important to stay focused.
“Try to use your attorney to get the job done – that’s what you hired your lawyer to do, to actually finalize your divorce and get you through that legal process,” she says.