Financial pitfalls to avoid
The process of a divorce can be extremely stressful - both emotionally and financially. If you don't fully understand the terms of your divorce settlement, you may find yourself experiencing serious financial challenges. The following are two common financial pitfalls you'll want to avoid when settling your divorce.
Pitfall #1: Not protecting your credit
Divorce can be damaging to your credit, so be sure and protect it while working through your divorce settlement. Start by getting a copy of your credit report and identify any open joint accounts that you may have with your soon to be ex-spouse. Even if the divorce settlement states that your spouse is to be held liable for any credit card debt, in the eyes of the creditor, you're both responsible for paying it in full if it's a jointly held account. If possible, try to pay off and close any joint retail credit card accounts as soon as possible to avoid future credit issues
Pitfall #2: Failing to safeguard life insurance policies
To ensure the value of child support, alimony, and other financial obligations, it's not uncommon for divorce settlements to require that you and/or your former spouse maintain life insurance. If you are the spouse for whom the coverage is obtained, it's important that you are notified in the event that premium payments aren't being made. For this reason, you'll want to be named as the owner of the life insurance policy if possible.
Divorce and finances can become complicated, which is why it's important that you understand how to better protect yourself. We're certainly not saying that your soon to be ex-spouse is trying to pull a fast one or that all divorce settlements are shrouded in suspicion. We're simply pointing out a couple of mistakes that couples can make during the divorce settlement process, so that you're better prepared.
Of course, if you have concerns or feel that your divorce settlement is being handled unfairly, get help from an experienced divorce attorney who can ensure that your legal rights are fully protected. You may also want to consult with a qualified financial or tax professional who can help you better understand financial issues such as any tax implications, alimony and child support that may result from your divorce settlement.