4 Unexpected Expenses During a Divorce
January: a time for snow, hot cocoa, and divorce? Believe it or not, January actually has quite the reputation amongst divorce lawyers and is consistently one of their busiest times of year. According to a recent survey of 2,000 spouses by legal firm Irwin Mitchell, 1 in 5 couples plan to divorce after the holidays. It seems that once the annual holiday obligations have passed, couples feel more willing to split and look to begin the New Year with a fresh start.
While divorce might be a step towards a happier life for many people, it can be a long, difficult and, of course, expensive process. While you may be aware of the high costs of hiring a lawyer, there are some additional costs that may catch you by surprise. Here are 4 unexpected expenses you might face during your divorce:
1. Adjustments to Insurance Policies
Insurance companies typically offer discounts to families who insure multiple items together (auto, home, life, etc). After a divorce however, these savings may dissipate if the policy is changed. Premiums for homeowner and car insurance can also increase after a divorce due to a separation of assets. Make sure you account for this change by speaking with your insurance provider or agent to get an estimate on your new premiums and to see if any discounts apply.
2. Strong Retirement Plans
If you relied solely on your former spouse’s 401(k) retirement plan during your marriage, you may face a pretty serious problem after your divorce. While a spouse is entitled to up to half the value of their ex’s 401(k), they will be responsible for finding a new individual plan. While saving for retirement is incredibly important, this new expense could be a serious drain on your income. Make sure to look into all the options available for you when starting your own retirement plan. If you’re unemployed or your employer doesn’t offer matching contributions see if supplementing an IRA with investments (stocks, mutual funds, real estate, etc) can provide you with extra cash to help you fill in the gaps left from your previous plan.
Once a divorce is finalized, both you and your former spouse will be responsible for handling the changes coming to your taxes. Between a change in income, a new filing status, and possible taxes owed on maintenance (a.k.a. alimony), you may see a big change in your tax bill. Find out as soon as possible whether you or your former spouse will be paying for the estimated tax on alimony and, if need, budget yourself accordingly to cover the expense. If you find yourself owing more at the end of the year, speak with your employer to see if you can re-adjust your tax contributions.
4. Expert Services
Aside from hiring a lawyer to oversee the divorce process, you may find yourself paying for additional services. A divorce should encourage you to change your will. You might also need to hire an expert to determine the value of your former spouse’s small business or other assets. In either case, you should take the time to write down every expense you may need to pay during your divorce. By getting a grip on the big picture and estimating your total cost, you can better budget yourself in the upcoming months to help pay back the costs.
Divorce, while a challenging period of transition, is an opportunity for you to start a new chapter. While the process for some might be long and difficult, you should do whatever it takes to ensure you start your new life off on the right foot. Take the time to review your finances, sit down and be honest with yourself. You may need to make some adjustments to your budget in order to cover any new expenses. Change is never easy but with hard work and a positive attitude you can make it!
Have you had to deal with any unexpected expenses during a divorce? Let us know in the comments!