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Top 3 Dumb Divorce Settlement Mistakes

by Kristen Hilty

When I was facing divorce I was full of fear, confusion, and emotional pain. I had been in the financial services industry for so many years, but my emotional state prevented even an intelligent financial professional like myself from seeing clearly. I was also told what I wanted to hear which lead to DUMB mistakes. Easily avoidable mistakes. This is why I’m here and I tell it like it is. Basically, let me help you not be dumb!

Below are the top three mistakes I see repeatedly when it comes to divorce. Settlements are agreed to (sometimes even ordered by a judge) then one of the spouses comes to me after-the-fact just as confused as they were during the divorce. When I read through their decree I just shake my head. Please – Don’t make these dumb mistakes!

#3 Dumb Divorce Settlement Mistake

The Settlement Doesn’t Take Taxes Into Effect – AT ALL!


We all know that Uncle Sam will dive into our pockets at every opportunity. Absolutely do not agree to a settlement without knowing the tax implications! What people often find is that the tax burden on their half of the marital assets is significantly higher than their spouse’s making their “half” of the assets worth significantly less than they thought! 50/50 is no longer 50/50. More specifically, don’t expect your attorney to point this out. Attorneys are not accountants or financial advisors and many of them won’t warn you. Let’s not hate on the attorney…It’s not their area of expertise.

#2 Dumb Divorce Settlement Mistake

Pensions are Split 50/50 but No One Knows What That Really Means


Over and over and over I see divorce decrees that order pensions split 50/50 but no one has any idea what the true value of the pension is, or what will actually happen. Did you know the value on the statement is not the actual value? When do you start collecting? Is there an option to take a lump sum? Will there be a cost of living increase each year? What if you or your spouse dies…Will it keep paying? When I ask these questions, no one has any idea what the answers are. So how can you possibly agree to a settlement without understanding something so crucial to your retirement? An attorney or mediator won’t be much help here. If you are an attorney or mediator reading this…you should speak to me immediately because you could be putting yourself at risk. Again…not your area of expertise so ask for help.


#1 Dumb Divorce Settlement Mistake

Keeping a House You Can’t Afford


I understand you may be emotionally tied to the family home and really want to stay. Before you even consider this option, you must do a budget. I strongly suggest you meet with a financial planner and/or CDFA®. I have witnessed where one or two years down the road the spouse who “won the house” has run out of cash and realized that they can’t afford the mortgage and/or maintenance, and can’t sell one of the windows to put food on the table. They also can’t refinance now because they don’t have enough income, and they have no choice but to sell. The selling costs are around 8% of the sale – all of which would have been split 50/50 with the ex if they had sold as part of the divorce. If the equity is high enough, there could also be a tax consequence that could have been avoided by selling the house while they were married. Dumb, dumb, dumb.

All completely avoidable. So listen…I know “dumb” is not a very nice word. Ignorance is probably more accurate, but it got your attention and please realize you don’t know what you don’t know. Bring in the right experts for your divorce to make sure that you are informed and make the smartest decisions you can with all of the information. As we say at Better Divorce Solutions, “You only have one chance to get it right!” Let us help craft a settlement that is truly equitable.

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