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When most people think about the costs of a divorce, they usually consider lawyer’s fees, filing fees, alimony, child support and other expenses directly related to the divorce. However, these aren’t the only financial repercussions that divorcing couples can face. There are a significant number of hidden costs that most people fail to consider prior to seeking a divorce. Unfortunately, these hidden costs can create havoc in the financial lives of both parties once the divorce is finalized.
Married couples enjoy the benefits of sharing resources during the marriage, even if only one party works. After the dissolution, the resources stay the same but there are now two households to support. Two homes, two cars, two utility bills … expenses double once the marriage ends and the spouses move into different homes. Resources are spread thin and many recently-divorced people must adjust to a lower standard of living.
Health insurance is an expense that most people don’t consider when considering divorce. In some cases, a divorce can reduce overall coverage costs, but this isn’t always the case. Under the ACA, spouses with pre-existing health conditions can secure new coverage. This may involve joining a temporary high-risk pool for a short period of time, but coverage is available. The main point to remember is that checking out coverage options prior to divorce is always a wise decision for all parties involved.
Divorce proceedings don’t directly affect your credit report scores. Credit and debt issues, however, can cause one or both spouses’ credit scores to drop. Most married couples have joint accounts and activity with the account is reported under both parties’ names. Although the divorce decree indicates who is responsible for each account, it doesn’t nullify the contracts with the creditors. If a spouse fails to make payments in accordance with the terms of the divorce, late payments can show up on the other spouse’s credit reports. Getting these matters resolved in court can take a long time, making it difficult for spouses to rebuild their post-divorce credit.
Divorce often comes with bigger tax bills. Once couples split, they may scramble to divide and claim marital assets. It’s not at all uncommon for one spouse to start clearing out bank accounts, cashing in CDs and liquidating other investments. These actions usually happen when individuals become blinded by fear and emotions, but these same spouses are often hit with the harsh reality of high taxes when it’s time to settle up with Uncle Sam.
The emotional and financial costs of this process can take a huge toll on all parties involved. The process is expensive and can take up quite a bit of time. However, it’s better to take the time needed to explore all the possible financial repercussions than to experience nasty financial surprises down the road. Preparing for contingencies in the face of an imminent dissolution can help you ensure that your financial health is protected as much as possible. Heading off these major issues before signing off on the divorce can save time, money and headaches for all parties involved.