For years, we have been told certain "truths" about divorce and money, many of which are completely wrong. Just like nutrition myths have misled people about what is truly healthy, financial myths in divorce can leave individuals vulnerable, making costly mistakes that impact their future for years to come.
Divorce is not just a legal process, it’s a financial transaction that requires a strategic approach tailored to an individual’s unique circumstances, needs, and long-term goals. But misinformation and fear often lead people to make emotion-driven financial decisions instead of strategic, informed ones.
So, let’s bust some myths.
Myth #1: Splitting Everything 50/50 Is Always Fair
The Truth: Equal is not always equitable. Just because assets are split down the middle does not mean both parties walk away with equal financial security. A strategic divorce plan considers tax implications, liquidity, and future growth potential, ensuring you do not just get half but “the half” that actually benefits you in the long run. For example, is it better to take half of a retirement account or a liquid investment portfolio? These are critical questions that must be addressed with strategy, not assumptions.
Myth #2: Keeping the House Is the Best Financial Decision
The Truth: Many people fight to keep the marital home, believing it represents stability. But maintaining a house post-divorce can lead to financial strain if the mortgage, taxes, and upkeep are not sustainable on a single income. A smarter approach is evaluating whether keeping the home aligns with your long-term financial goals and personal circumstances. In some cases, selling the house and reinvesting the proceeds can create more financial security than holding onto an asset that may become a financial burden.
Myth #3: Divorce Means Financial Ruin
The Truth: While divorce can be financially disruptive, it does not have to lead to financial ruin if handled strategically. The key is financial planning before, during, and after divorce to ensure stability and a wealth-building path forward. Those who approach divorce with a clear financial strategy emerge stronger, not struggling. Understanding cash flow, future earning potential, and investment strategies can make the difference between financial hardship and long-term stability.
Myth #4: I will Just Let My Attorney Handle Everything
The Truth: Attorneys are essential for the legal side of divorce, but financial strategy requires a different level of expertise. Many financial mistakes, like improper asset division, tax missteps, and long-term financial insecurity occur because financial planning was not integrated into the legal process. A Certified Divorce Financial Analyst® (CDFA®) ensures your financial interests are protected beyond just legal negotiations. For example, structuring a settlement to minimize taxes and maximize cash flow is not something most attorneys specialize in, yet it has a major impact on your financial future.
Myth #5: Child Support and Alimony Are Set in Stone
The Truth: Support calculations depend on income structures, state guidelines, and negotiations. Many high earners, including business owners and doctors, assume they have no control over these payments. But accurate income calculations, tax implications, and legal strategy can significantly impact final agreements. Additionally, structuring alimony in a tax-efficient way can make payments more manageable for the payer while ensuring long-term stability for the recipient.
Myth #6: Once the Divorce Is Final, I Don’t Need a Financial Plan
The Truth: Divorce is just the beginning of your financial reset. Updating estate plans, adjusting tax strategies, rebuilding wealth, and ensuring proper asset protection are critical steps that many people overlook. A post-divorce financial strategy ensures you are not just surviving but thriving. Taking proactive steps, such as adjusting investment allocations, setting new financial goals, and ensuring proper beneficiary designations on accounts can prevent costly mistakes down the road.
Myth #7: Business Owners Always Lose in Divorce
The Truth: While business valuation and division can be complex, business owners do not always “lose” in divorce. With proper planning and negotiation, you can protect your business interests while ensuring a fair outcome. Strategies such as structured buyouts, prenuptial/postnuptial agreements, and income adjustments can make a significant difference in business protection.
Myth #8: High Earners Have No Control Over Asset Division
The Truth: Many high earners believe that asset division is completely out of their hands. However, strategic settlement structuring, tax planning, and negotiation tactics can significantly impact what they keep or give up as part of the divorce agreement. Utilizing financial experts to project long-term financial scenarios can ensure an outcome that aligns with future goals rather than just immediate needs.
Misinformation leads to fear-based decisions and fear is never a good strategy.
When approached strategically, divorce becomes an opportunity to restructure your financial future, protect your assets, and build lasting stability based on your individual needs, priorities, and long-term financial vision.
The key takeaway? Don’t rely on outdated myths. Rely on strategy designed specifically for you.
By Gabriella E. Martinelli, Divorce Financial Strategist.
About me: I am the founder at Ever After Wealth® and a Certified Divorce Financial Analyst®, Certified Divorce Specialist® as well as a Nationally Certified Mediation Professional®
To learn more about our firm, visit our website www.everafterwealth.com or reach out to me directly at gabriella@everafterwealth.com.
Disclaimer-- To prevent any potential conflict of interest, Gabriella neither manages assets nor offers investment advice. She does not engage in selling financial products and operates solely as a consultant.
Commentaires