Divorce can be an expensive process, with many costs beyond the well-known lawyer fees. Here are a few you need to keep your eye out for.
Dividing the marital home
One of the most significant expenses is often the splitting up of a family home. When a couple gets divorced, they must decide what to do with their shared property. This can involve selling the house and dividing the profits or having one partner buy out the other’s share of the property. If one partner decides to buy out the other, they will likely need to refinance the mortgage in their name, which can come with its own set of fees and expenses. Add in the cost of commissions and real estate attorney fees, should the home be sold, and this can get really expensive, quite quickly.
Dividing retirement funds
Retirement funds are another area of concern when it comes to divorce. In many cases, couples will have joint retirement accounts that will need to be divided. This process can be complicated and involve significant fees, especially if the accounts are large. In some cases, one partner may be ordered to pay the other a portion of their retirement benefits as part of the divorce settlement. This can have a significant impact on both partners’ retirement plans and financial futures. Not to mention, if getting a Qualified Domestic Relations Order (QDRO) to divide retirement (including pension) plans, that is an added cost. Some folks choose to hire a Certified Divorce Financial Planner® like myself to help them navigate these decisions as taxes can also be involved, which brings about additional costs if there are errors.
Moving can also be a significant expense associated with divorce. In many cases, one partner will need to find a new place to live, which can involve a variety of costs, including security deposits, moving expenses, and new furniture and household items. These costs can add up quickly, especially for individuals who were not financially prepared for the divorce.
Other expenses associated with divorce can include the cost of hiring professionals to value and divide assets, such as businesses or investment portfolios (which I have already alluded to). Additionally, if one partner is ordered to pay alimony or child support, these ongoing expenses can have a significant impact on their financial situation.
Other things to consider
It is important to note that the costs associated with divorce can vary widely depending on the circumstances of each individual case. For example, couples with few assets and no children may have a much simpler and less expensive divorce than those with significant assets and complex financial situations. Additionally, the state in which the divorce takes place can have a significant impact on the costs involved. Some states have higher filing fees and more complex legal requirements than others.
Again, this is where a CDFA® can help you avoid some of these costs as, the quicker an analysis and equitable division of assets is, the lower attorney fees are. We see costs rise when people fight each other over the simplest things that, in the long run, make a small difference (e.g., fighting over personal valuables that can easily be replaced).
Despite the potential costs associated with divorce, it is still possible for individuals to prepare financially and minimize the impact of the process on their financial futures. This can involve creating a detailed budget, working with a financial advisor, and being realistic about one’s financial situation. It is also important to prioritize expenses and consider options like using a mediator instead of going to court to help keep costs down.
If you are considering a divorce, working with an attorney and Certified Divorce Financial Analyst® can help you create Team You. Schedule a time to talk with a CDFA® here.