Divorce mistakes you can make by being too nice
(Reuters) - Five years ago, Devon and Emily Reese decided to divorce. There wasn't much discussion about saving their 10-year-old marriage: Devon had just come out of the closet.
It was a tumultuous time, but the Reeses, who live in Reno, Nevada, and have three children, went along with the conventional wisdom that it's best to end a marriage as amicably as possible. As Devon says, "When you get on the other side of the divorce, you're still going to parent-teacher conferences together."
So when Devon, an attorney, lost his job after their breakup, and bankruptcy and a foreclosure followed, he suggested they file for divorce only after he found new employment. That way, Emily would be entitled to far more money in alimony and child support.
Emily compromised as well. In 2009, when their divorce was official, instead of taking alimony ($1,245 a month) for the five years that Nevada law allowed, she accepted three, which meant giving up almost $30,000 over two years. She agreed because she planned to finish her master's degree within three years, so she could get a job teaching English at a local college.
She didn't plan for colon cancer.
Her illness sidelined her education and ability to earn money for a year. If Devon had wanted to be rigid about their settlement, she would have found herself in a heap of financial trouble, living off $2,000 a month in child support and trying to pay $1,325 in monthly rent. Emily says, "I would have been screwed."
The Reeses' story underscores a common dilemma. Even in an amicable divorce, financial mistakes can be made by either or both parties. In fact, experts say financial mistakes often occur precisely because both parties are trying to be friendly. "The undercurrent of being amicable masks the cold reality that your spouse is not in the position to protect or promote your interests," says John Mayoue, an attorney who has represented high-profile clients including Jane Fonda and Marianne Gingrich.
"People seeking amicable divorces often come into these very naive," says Mayoue, the author of several books about divorce with titles like "Protecting Your Assets from a Georgia Divorce."
Many divorcing couples make poor financial decisions because they don't want to rock the boat, say experts, and they gloss over details, only to be tripped up later. So if you're striving for an amicable ending, here are some common financial mistakes divorcing couples tend to make.
KEEPING THE HOUSE
Even in the current housing market, it may not be the best idea. "I see that a lot, wives staying in the family home for the good of the children," says Laurie Blazek, a certified divorce financial analyst based in Chicago. "They'll take that asset and give up cash or liquid assets in exchange for equity, but nobody's looked at the numbers to see if they can afford to stay in the home."
NOT HAVING THE ENTIRE FINANCIAL PICTURE
For instance, who gets to deduct the children when the couple files their taxes separately? "The number one thing I see is that people don't get adequately informed regarding their financial family's worth," Mayoue says.
Sometimes that's due to fear. Spouses hesitate to ask their once significant other for paperwork on retirement accounts or estate planning documents. "They're afraid they might upset them if we ask them to prove what they're saying," says Mayoue.
NOT GETTING PROFESSIONAL HELP
Since you're doing everything amicably, why bring in the attorneys who are going to muck it all up? But Erica Gongloff, an early-childhood educator in East Calais, Vermont, saw the benefits of having a neutral third party decide how much child support she should receive from her soon-to-be ex-husband, Adam Piche, a veterinary technician in Essex, Vermont. She and Piche, who have two children together, separated in 2004 and divorced in 2006.
During their separation, Gongloff went with a "he pays me what he can pay me" attitude, because she wanted their relationship to be as argument-free as possible. But that made getting by a challenge.
Vermont's Office of Child Support (OCS) worked it out for them. "It was a formula, and it came out of his paycheck," Gongloff says, "and it relieved us from having to argue about it."
While there is a lot of information on the Internet aimed at helping divorced couples decipher their finances - the Internal Revenue Services has a lot of helpful publications on divorce and taxes - there may be issues with IRAs, 401Ks, stocks and capital gains that can be challenging to comprehend.
As Blazek says, "You don't want to make a mistake you can't reverse."
BE CAREFUL WHO YOU BRING IN FOR HELP
"Make it clear to the lawyer that the lawyer works for you," says Mayoue. "You'll listen to and respect the advice, but you aren't going to go down the path of scorched earth and literally prohibit them from doing so." He adds that it can be a difficult conversation to have with a professional, "but I think it's a necessary one if you want a friendly divorce."
STAY NICE IN SPIRIT, BUT WITH OPEN EYES
Emily Reese was fortunate. When she was sick from chemotherapy, Devon took the kids for several months and could have reduced child support for his ex-wife. He didn't, and even though he isn't legally obligated, Devon is extending the alimony time frame until his wife finishes her master's degree and gets a job, which will probably be another year. The cost to him will likely be $15,000 more than he originally agreed upon.
The two recently started a blog together about being on the same side after divorce and have an easy rapport, although it wasn't always that way.
"I had some anger to work through first," says Emily.
But they discussed their finances and still do, which is the model behavior for divorcing couples, says Howard Markman, a psychology professor and co-director of the Center for Marital and Family Studies at the University of Denver.
"Too many couples don't express as clearly as they can to each other how they feel about their financial situations. But it can be a double-edged sword," he says. "Money is the biggest thing that couples fight about in the first place."
(The author is a Reuters contributor.)
(Follow us @ReutersMoney or here. Editing by Beth Pinsker Gladstone; Lauren Young and John Wallace)