5 Hidden Costs of Divorce
Learn about the hidden costs involved with the divorce process.
Getting a divorce is a stressful and expensive process, but many people do not realize that the costs do not end once the divorce is final. The divorce process and the aftermath have various costs that spouses do not consider or expect. Here are five hidden costs that are commonly encountered in a divorce.
1. Legal fees
Working with a lawyer in a divorce case can involve significant costs and fees. Even once your divorce is finalized, you will likely deal with additional legal fees related to your original case. You might need to pay costs associated with making any necessary adjustments to your parenting agreement, requesting changes to child support or alimony, or consulting a lawyer for advice. Depending on the age of your children, these costs can recur multiple times until a parenting plan or child support is no longer required.
2. Housing costs
When your divorce is finalized, it is likely that you will no longer live with your spouse. As a result, you will need to deal with costs related to selling your current house, finding your future residence, and moving from one to the other.
Most divorced couples choose to sell their home and split the proceeds, and selling your home can involve various expenses related to staging, repairs, and other preparations. Once the house is sold and the proceeds are divided, you’ll need to deal with any costs related to moving your belongings to your next home. Once you relocate, you are solely responsible for your new home’s mortgage or rent payment, utilities, homeowner’s insurance, and other expenses.
3. Health care
If you are not the primary policyholder, divorce can potentially result in a lapse in health insurance coverage and temporarily higher health care costs. Any required appointments or treatments for you or your children can be significantly more expensive without health insurance. Either you or your spouse will need to cover your children’s health insurance on top of your own, and these costs can be higher than they were when managed with your spouse.
Going through a divorce can increase stress and anxiety levels for most couples, so accounting for costs related to caring for your mental health is also a good idea. Your children are also susceptible to increased stress from the separation, so seeking professional help can be a great tool in helping them process the divorce.
4. Taxes
A considerable hidden cost of divorce pertains to income taxes. Filing as an individual has a reduced standard deduction compared to filing jointly, so your tax bill can be significantly higher than what you initially expected. Additionally, you may miss dependent and education credits for your children since both parents cannot claim these credits. Regardless of whether you claim these credits or not, you need to prepare to pay the IRS more than what you’ve previously paid.
5. Retirement savings
Any assets that you and your spouse share will likely need to be split in some way during a divorce, and your retirement savings are no exception. Retirement-fund splits can be hidden depending on your and your spouse’s ages, but whatever retirement plans you have will be affected. Splitting these assets could potentially involve administrative fees in addition to the legal fees needed for your lawyer’s advice and involvement. These factors, combined with a likely need for a post-divorce lifestyle change, can significantly affect your retirement plans.
With so many hidden expenses in mind, it is crucial to manage your finances efficiently. For parents going through a divorce, TalkingParents might be able to help you save money when working with an attorney. Our service can also be an extremely helpful tool for co-parents to manage custody matters after divorce. Learn more.