Family finances are often a major obstacle to reaching a divorce settlement. There are several key financial challenges that you and your spouse may encounter when navigating divorce.
- One of the foremost financial challenges in divorce is the increased cost of maintaining two households instead of one. When you separate, and your income remains the same, you now face the burden of maintaining two separate households and the related expenses. This sudden doubling of housing costs as of the date one spouse moves out can place a substantial strain on you and your spouse’s budgets.
- Financial asymmetry between you and your spouse can be a significant obstacle. In many cases, your spouse may have been solely responsible for managing financial obligations, paying bills, handling bank deposits, and working with accountants to prepare taxes. This knowledge gap can slow down the divorce process, as the spouse with less knowledge of the family finances becomes educated to understand the financial situation before being able to make informed decisions.
- Trust issues stemming from infidelity or other breaches of trust can further complicate financial matters. Suspicion of community funds that have been used for extramarital affairs can lead to forensic accounting investigations. Such investigations aim to determine if community property funds were misused, adding an extra layer of complexity and mistrust to the divorce proceedings.
In the Collaborative Divorce and mediation processes, the neutral financial professional plays a crucial role in bridging the financial knowledge gap and helping both parties make informed decisions about their future. The collaborative approach involves educating the less financially savvy spouse while encouraging the more knowledgeable spouse to slow down and enable their partner to catch up in the financial knowledge, fostering a more cooperative environment. The forensic accountant can assist with these issues in collaboration, mediation, and if necessary, as an expert witness in litigation.
Budgeting is another essential aspect of addressing financial obstacles in divorce. The Collaborative Divorce professionals guide divorcing couples in preparing budgets to understand their financial reality in post-divorce life. These budgets help determine temporary and long-term support payments, revealing whether there are budgetary shortfalls that need addressing, such as downsizing a house or making other financial adjustments.
These financial questions are often the biggest barriers to reaching a divorce settlement. Clearing these obstacles and achieving a mutual understanding of financial matters can significantly increase the chances of a successful resolution. However, the fear of economic insecurity, especially for individuals with limited financial knowledge, can prolong the process as both parties’ work to gain a comprehensive understanding of their financial standing.
Divorce is not just an emotional and legal journey; it’s a financial one as well. Addressing the various financial obstacles that can arise during divorce requires patience, cooperation, and a commitment to understanding each party’s financial situation. By overcoming these hurdles, divorcing couples can move toward a more stable and secure future.
To schedule a consultation or more information you can call (310) 378-6606. You can also contact us here.
We are located at 28441 Highridge Rd. #110, Rolling Hills Estates, CA 90274.