Divorce? The 6 worst money mistakes


During a divorce, a spouse who hasn’t shown much interest in the family’s finances can often be at a disadvantage during settlement negotiations. That’s why it’s so important for both spouses in the process of dissolving their marriage to understand their post-divorce financial needs and their current financial situation.

The following six items are often overlooked as part of the settlement process, but they’re vital areas to address:

1. Cash flow needs

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Understanding your need for immediate cash flow is extremely important in determining which assets would be the most beneficial for you to receive in the divorce.

If immediate cash flow is a concern, the most valuable assets for you are ones you could sell easily and quickly (so-called liquid accounts), such as stocks, bonds, mutual funds and possibly Roth retirement accounts.

If immediate cash flow is not an issue, a combination of assets with various degrees of liquidity (taxable and retirement plan accounts) will likely be more beneficial long-term.

2. Joint liabilities

Just because you agree to split a liability does not mean that the lender will honor your property-settlement agreement. Mortgages will need to be refinanced (if possible), any outstanding tax liabilities on jointly-filed returns will need to be paid and jointly-held credit cards will need to be canceled.

It is important that all liabilities are settled before completing a divorce, either by paying them off or by transferring them to the spouse taking responsibility for the debt.

It is also a good idea to run a credit report to determine if there are any outstanding debts that need to be addressed before settlement.

By securing proof that all liabilities have been settled before the divorce finalization, you’ll avoid an unpleasant surprise when a creditor demands payment from you for a liability that you thought had been settled.



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