No one goes into a divorce anticipating things will go wrong, but all too often, things do. Frequently, essential items get overlooked in the final agreement. Missing crucial parts of your divorce agreement can lead to big problems later. Let’s discuss 5 things often overlooked in divorce agreements so you can protect yourself and your finances long after your divorce.
5 Things Often Overlooked In Divorce Agreements
1. Financial Estate Planning
You and your spouse may have spent years building up your estate. In the event of divorce, you’ll need to consider how to protect your assets. Consider your legal tools and financial agreements, including wills, trusts, property division, and life insurance. Without proper estate planning, you could lose a significant portion of your wealth in a divorce.
For example, if you and your spouse own a life insurance policy together, you’ll need to decide on the new primary beneficiary. If you don’t name a new beneficiary, your ex-spouse could still receive the death benefit from the policy. This occurrence could leave your family without financial support in the event of your death.
Estate planning is essential if you have children from a previous marriage. You’ll want to make sure that your children are taken care of financially in the event of your death. You’ll also need to name a guardian for their care. Working with your attorney can help you amend your will if need be. Preparing for your children’s future care should not be taken lightly.
It is easy to overlook taxes in a divorce agreement. Not considering tax implications can significantly impact your financial situation after the divorce.
You and your spouse will need to figure out how to file your taxes after the divorce. If you have joint accounts or assets, you’ll need to decide how to divide them. You may also need to consider alimony and child support when filing your taxes.
“Say your spouse handles all the investments and offers to split them 50/50. Sounds good, right? The only way to know if you’re getting a fair deal is to determine the value of the investments on an after-tax basis, then decide if you like the deal. Again, you should speak with a tax professional about the impact of any proposed property division before you agree to it.” (1)
For example, if you pay for the children’s health insurance and are the primary caregiver, you may want the divorce agreement to allow claiming the children on your taxes. If you’re not sure how to handle taxes in your divorce agreement, talk to a tax advisor or lawyer before signing anything.
3. Power of Attorney
You and your spouse may also accidentally not think about power of attorney (POA) legalities. A POA gives someone else the legal authority to make decisions on your behalf. This legal authority can help if you become incapacitated or unable to make decisions for yourself. A power of attorney can help you avoid losing control of your assets if you become incapacitated.
However, if you previously named your spouse, immediately change your power of attorney to someone you trust. Don’t wait until after the divorce to handle this issue. If your spouse is devious, they may make bad decisions for you in your name as your power of attorney. Sometimes, situations get out of control when the wrong person is your power of attorney.
Name someone else you trust as your POA so that your spouse can’t make decisions about your health, finances, or property without your permission.
However, don’t remove power of attorney from everyone. Make sure to name someone you trust. You could find yourself in a coma in the hospital without a designated POA. At that point, the doctors may ask your spouse what to do about your healthcare. Depending on your relationship with your soon-to-be ex-spouse, you won’t want them making major medical decisions for you.
If you’re considering a divorce, talk to a family law attorney about estate planning and power of attorney. It is easy to overlook these things in divorce agreements, but they can significantly impact your financial situation after the split.
4. Retirement Accounts
Another thing to think about in your divorce agreement is retirement accounts. You and your spouse will need to decide how to divide things like pensions and 401(k)s.
Divvying up financials can be a complicated process, so it’s vital to get professional help when dividing up retirement accounts. You’ll need to consider taxes and early withdrawal penalties when dividing up retirement accounts.
Be sure to talk to a financial advisor or lawyer before agreeing to anything in your divorce agreement. They can help you figure out the best way to divide your retirement accounts so that you’re not penalized financially later on.
Dividing property and assets is one of the most challenging things in a divorce. There are so many things to consider, from taxes to retirement accounts. Be sure not to forget the things often overlooked in divorce agreements. Get professional help when negotiating your divorce agreement. Otherwise, you could end up losing out in the long run.
5. Debts & Liabilities
If you have any debts, you’ll also need to consider how to divide those in a divorce. You don’t want to be stuck with all the debt after the split. Ensure that all obligations and liabilities are part of your final divorce agreement.
Also, consider what will happen if your spouse dies before your divorce occurs. Protect yourself from liability if your spouse dies. For example, if your spouse has a student loan for $40,000, you don’t want to pay that bill if they die.
Talk with your family law attorney about limiting your liabilities now and in the future.
We Can Help
If you have any questions about the things often overlooked in divorce agreements or estate planning, talk to us at Plekan Law. Our experienced family law attorneys work to ensure divorce agreements that cover every possible problem. Divorce can be an emotional time, but it’s crucial to think about the legal implications of the split. By taking the time to consider these things, you can protect yourself and your finances in the long run. Contact us today and find out how we can help.