Five Financial Mistakes to Avoid Before and During Your Divorce

You are about to start the divorce process or you have already started the process.  Here are Five financial mistakes (with one bonus as well) that you need to avoid before and during your divorce.

  1. Letting your spouse “pay the bills” (or pay the expenses): Prior to your divorce, perhaps you (like many other couples) allowed your spouse to “pay the bills”. Although, that might have worked while you were married, this can typically lead to disaster, especially during your divorce.  Instead, you and your spouse need to coordinate in who pays which bills (expenses).  Alternatively, you can each contribute 50% (or whatever percentage works in your case) to each of the bills.  You also want to make sure that if your spouse is paying the bills that you get documentation that the bill is actually being paid.
  2. Gifts or Loans from Family or Friends: In many divorces, you might seek out your family or your friends for financial assistance.  If your family or friends want to help you out, then you want to make sure that is done in the right way.  If you receive a gift, then that might be considered as “income” and actually hurt you when calculating child support or spousal maintenance.  Therefore, it might be better to receive a loan from your family or friends.  However, to be considered a loan, then the funds should be secured with either a loan agreement or a promissory note.  You should consult with your attorney on how to make sure that the loan is properly structured so that it is not considered as income or as a gift.
  3. Tax Considerations: You should consult with an accountant to consider whether or not to change the amount of deductions on your W-4 form.  In too many situations, clients will change the amount of deductions without consulting with their accountant.  This may result in you owing too many taxes in the next tax year.
  4. Not adjusting your budget: In virtually every divorce, you will have less financial resources after your divorce than before your divorce (at least initially).  You need to review all of your expenses and adjust your budget accordingly.  Even small changes can add up to big savings.  However, it is important to note that you cannot violate the “Automatic Orders” (see the next number).
  5. Violating the “Automatic Orders”: At the start of every New York Divorce, there are the “Automatic Orders”. As with any Court Order, these are Orders that apply to you and your spouse.  In summary, the Automatic Orders state:

a. You cannot withdraw or sell any real estate, personal property, stocks, mutual funds, bank accounts, cars, boats that you or your spouse own.

b. You cannot withdraw or sell any retirement type accounts (401K, 403B, IRA).

c. You cannot incur unreasonable debts.

d. You cannot remove your spouse or any children from any medical, dental or life insurance plan.

There is an exception to most of the above rules, you can transfer, withdraw funds that are in “the usual course of business, for customary and usual household expenses or for reasonable attorney’s fees in connection with the divorce.”  Before you make any large financial decisions, you should consult with your attorney on whether or not it might violate the Automatic Orders.

  1. Not listening to your attorney: Your attorney will give you lots of advice during your divorce. It is important to listen to this advice.  In too many cases, a client will do ‘what they think is right”, yet, this will almost always work against their interests, including their financial interests.  Furthermore, by not listening to your attorney, you will probably incur more legal fees.

David Badanes and the Badanes Law Office, P.C. have helped hundreds of clients in their divorce.  David Badanes is well respected throughout the field and has the experience and knowledge to help you.  The Badanes Law Office helps clients in Suffolk County, Nassau County and in New York City.

If you are seeking a divorce, call David Badanes and the Badanes Law Office at 631-239-1702, email at or visit our website:  The Badanes Law Office has offices in Northport and Uniondale.

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