Considering a settlement?
School, College and Other Living Expenses Can Create Stress Down the Road
By CARL PALATNIK
While financial settlements attempt to address the needs of all parties, they are often agreed upon with limited insight into the long-term economic consequences. As a result, settlements that appear fair and workable on the surface do not always stand the test of time.
The good news is that what happened to Susan Johnson was predictable and avoidable. As shown in the following projections, Susan’s expenses would exceed her income, and her projected working capital would decrease to financial ground zero in approximately three years. While she would still have assets, they would be tied up in the house and only accessible at great cost. If she waited too long to rectify this problem, her net worth would continue to
decrease, and her worst fear would be realized – she would lose the house. Furthermore, because she had exchanged any rights she might have had to Michael’s pension, she would be faced with the prospect of winding up with neither.
Although with professional help it’s probably not too late for our hypothetical Susan to find her way out of her current financial predicament, she will have fewer options and will more than likely be forced to make financial compromises she would not have had to consider three years earlier. Had she analyzed the long-term economic consequences of alternative settlement scenarios, prior to reaching her agreement, she may have been able to arrive at something more workable, and she might not be faced with this potentially devastating problem.
Are you considering a particular settlement scenario? Are you sure it will work for you? Do you know what you will need to do to make it work? Are there potential problems that you need to be aware of before you sign on the dotted line? Would other settlement scenarios work better for you?
Carl M. Palatnik is a Certified Financial Planner practitioner, a Certified Divorce Financial Analyst and an Accredited Asset Management Specialist. He can be reached at c.palatnik@divorce360.com.
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