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.
For many, the New Year brings the fresh start they’re looking for once the holiday obligations are over.
Divorce can lead to a happier life in the long run, but it can be a long and stressful 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, policies get changed and therefore, so do the savings. Premiums for a homeowner and car insurance can also increase after a divorce due to a separation of assets. Speak with your insurance agent ahead of time so you can prepare for the new expenses and see if there are any discounts which may apply. It may be in your best interest to also consider switching insurance companies if they can offer you a better rate.
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. Saving for retirement is very important but can be seriously draining on your income. Make sure to look into all the options available to 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 can provide you with extra cash to help you fill in the gaps left from your previous plan.
Once the divorce is finalized, both partners will be responsible for the changes to their individual tax bills. 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 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. You may need to hire an attorney to redo your will or assess the value of certain 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. Take the time to review your finances, sit down and be honest with yourself. You may be faced with new expenses that you now have to budget for. 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!