How to avoid money mistakes in a divorce

On Behalf of | May 25, 2021 | Divorce

As an equitable distribution state, Colorado law states that joint assets should be divided in a fair manner in a final settlement. In some cases, this may mean that marital property is split 50/50 between both parties to the relationship. Regardless of how joint property is allocated in a divorce, the end of your marriage will likely have a profound impact on your finances.

What’s the true value of an asset?

If you’re not dividing assets but exchanging them with your spouse, keep their true value in mind. A home that is valued at $100,000 is likely worth less than a brokerage account that is also valued at $100,000. This is because you’ll have to pay fees, taxes and other costs to transfer ownership of the real estate to another person. If you retain ownership of the home, you’ll likely pay thousands of dollars in property taxes, interest on your home loan and repair costs. Conversely, the brokerage account will likely grow in value over time with little effort on your part.

Make sure to create a reasonable budget

You’ll likely be responsible for buying your own food, making your own housing payment or purchasing a private health insurance policy after a divorce settlement is finalized. Although your spouse may provide financial assistance as part of the final settlement, there is no guarantee that it will be enough to make ends meet. Ideally, you’ll meet with a financial adviser who can provide more insight into how to live a comfortable lifestyle on your budget.

What happens if your spouse loses his or her income?

It may be in your best interest to ask your spouse to take out a life insurance policy as part of a divorce agreement. This minimizes the risk that you lose your spousal maintenance payments in the event that your former partner is unable to work for any reason.

An attorney may be able to help you obtain a favorable settlement in your divorce case. This may be done by reviewing financial records, a prenuptial agreement or other documents that help establish what an equitable distribution of assets would look like in your settlement.