Children disinherited, bankruptcy, unforeseen tax or other financial upheaval. What could cause this, so much distress?
Divorce. Besides being one of the most stressful times in life emotionally, divorce is a transition that is fraught with financial pitfalls that can easily catch the unwary. Many times, assets and income are in a way that a just seems to be designed today, but it can lead to extreme hardship in just a few years.
Let's look at just a few commonErrors in case of divorce and see what will be done to prevent it. I'm going to 'is man "and" woman "in the role I see the most, but certainly these roles are often reversed.
Most divorces relate to two or three large fortune, family, pensions, and perhaps the family business. But distribution of these assets is anything but simple. It is for the woman to keep the house together, and the equity, while the man is the equivalent in thePension Plan or business.This sometimes leads to financial ruin for the woman, and the reason is very simple. While she was a plant at home is the feeling of security it provides and the equity is to have the house, it does not provide cash flow, and therein lies the problem.
If the woman gets the house, what happens when the alimony or child ends? Where does the money come from to finance their lifestyle? Unfortunately, this is a valuable asset left is theHouse, and she is often forced to either sell or refinance. And then what? It is a decline in net worth from the left, perhaps not appreciated assets and the potential for large tax on the sale. Once the shares will be issued out of the house, what's she doing? How many people have many women enormous capacity for work, but it is a common experience this real world. If the spouse that the house always several years have been projected, they can see that the maintenance of the housecould provide some short-term comfort, but ultimately lead to financial ruin.
Pensions also present a great opportunity for error. In one case the man received a statement issued by his employer confirming that its pension plan was valued at $ 92,000. The woman had a pension plan from their employer reflecting a value of $ 93,500. Simple enough, she holds her, he keeps his, and everyone is happy, right?
Unfortunately he did not understand that the $ 92,000 representedwhat he would receive if he quit or to withdraw now. If he stuck to his work until retirement age, his real advantage would pay an income based on a percentage of final average. It was difficult not to be sneaky, do not understand it easily. The current value of its future stream of income? Testified Certified Divorce Financial Analyst working with the family law attorney that the plan was the present value of $ 340,000. On the basis of this statement, the judge required him tothey pay $ 1500 per month for 15 years. Do you think they would have been unhappy this subtle nuance was missed?
These are just two of the most common number and variety of financial errors in divorce. Measured by the number of questions my office receives about this issue, financial planning in divorce is a very hot topic, and potentially devastating financially. Enter consider this carefully.
Kevin Bourke is a registered principal with, and offers securities through access to,LPL Financial, member FINRA / SIPC