Many of the costs associated with divorce are well-known and predictable. Divorcing spouses know they have to pay for their time in court and the representation of their attorneys. Those with children understand that they may have to pay child support depending on how they end up dividing custody.
People can plan and budget for those expenses so that they don’t cause significant financial complications. However, there are many other expenses that people may not have prepared for before the divorce.
Especially when trying to absorb multiple expenses in a short time, additional costs can be a major budgetary concern. People contemplating divorce may be able to budget more effectively if they understand some of the hidden costs that they may have to cover.
The cost of dividing assets
People generally know that they have to divide their property when they divorce, but they may fail to consider the costs associated with doing so. For example, if people don’t follow the right process when splitting a 401(k) or similar retirement account, to a 10% penalty in addition to the losses that they take by splitting the account with their spouse.
Changing the ownership of a house requires the execution and recording of a deed, both of which can cost money as well. There are often numerous costs associated with dividing marital property.
The cost of relocating
Most of the time, divorce proceedings result in at least one spouse leaving the marital home. Moving is expensive on its own. Obtaining a moving vehicle and professional support can be costly. People may also need to replace some of the personal property that their spouse retains. From small kitchen appliances to furniture, there can be many one-time purchases necessitated by a divorce when one spouse moves out to live on their own.
Increased tax obligations
Divorce results in numerous income tax implications. Not long ago, spouses could deduct the income that they paid in alimony, but tax law has changed. People lose the tax credits and other financial benefits of marriage in a divorce. They may end up paying substantially more in income taxes than they would have if they remained married.
Understanding the costs that can arise during a divorce can help people prepare for what can be a complicated and expensive process. Budgeting to cover not just court costs and attorney fees but also secondary expenses can help people maintain a comfortable standard of living despite the sudden change in their circumstances.
