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How will financial projections help in analyzing a settlement proposal?
Prior to accepting a settlement proposal, it is important that both parties to the agreement understand the long-term financial implications of the proposal; some settlement agreements will destine one spouse to future financial difficulty even though the assets have been fairly divided. For example, in a situation where a couple has two large assets, say a pension or business and a matrimonial home, if one spouse keeps the matrimonial home and the other spouse keeps the business or pension, the spouse with the home can often run into financial difficulty in the future. This is because the house is not an income producing asset and instead requires a certain amount of cash flow to maintain. In this situation, the spouse with the matrimonial home may require a mortgage on the home to provide adequate cash flow to live, which will erode their net worth. Eventually, they will have no net worth and no cash flow.
The previous example was just one possible scenario; there are many possible situations where the way in which the assets are divided will have a significant impact on the future financial wellbeing of the both spouses.