Your Divorce Settlement – Be Careful What you Ask For

About 5 years ago, I met with a husband and wife going through a divorce. Todd and Judy had been married for 28 years and, during 18 of those years, Tom had been having an affair. Judy felt betrayed and angry. During our first meeting, Judy declared, “I am getting $3,000 per month in alimony and will go to court to get it.” She even banged her hand on the table as she said this. During my work with them, I analyzed their assets and debts and prepared seven different settlement scenarios, showing their cash flow and growth of assets in the future. In the end, Judy decided that she didn’t want alimony but, wanted a larger share of the assets. That was fine with Tom who wasn’t looking forward to writing the monthly checks.

The above story illustrates a point — what you think you want many times isn’t the best option. Judy came to realize that her desire for alimony wasn’t in her best interest since she would have to pay taxes on the alimony and, would not have to pay taxes on the larger share of the assets she would receive.

Before you start negotiating your settlement, ask yourself several questions.

1. Why do I want what I am asking for?

2. Do I need what I am asking for?

3. Would it be to my advantage to divide the assets and debts another way?

4. What will my financial situation be 5 years from now if I agree to this specific proposal?

5. The old saying “look before you leap” especially applies in divorce. Make sure that what you want now will be what you will need in five years and beyond.