June 18, 2019
You may not be in a fiscal frame of mind when initiating divorce proceedings. But in addition to the emotional toll of divorce, both you and your partner need to brace for a financial hit. From attorney fees and court costs to alimony and real estate appraisers, the costs of a divorce can compound quickly. As The Street points out, the national average cost of a divorce is around $15,000—per person! Here’s how to prepare yourself and your checkbook for five of the most common divorce expenses as well as how you can prepare for them.
If your split is amicable, you may not need or want an attorney. However, with significant assets, child custody, and real estate, for example, it may be in both of your best interests to hire representation. Know that lawyer fees can differ drastically, from a fixed retainer to an hourly rate. You should also account for court and filing fees, all of which can add up fast when two parties fail to agree on terms.
“For richer, for poorer” applies to not only your marriage but also your debt. If you jointly incurred a loan or debt during the course of your marriage, this tie is binding until repaid. No matter what settlement you reach, you will be responsible for your half of paying down that balance.
Perhaps you or your spouse had a better insurance package, so one of you signed on to the other’s health plan and never gave it another thought. But now it’s time for a “life event change,” which means no more shared health and dental, in addition to your bundled auto and home insurance. The dissolution is one challenge to prep for and shopping for new coverage can be more costly than you expected or bargained for.
As Ben Franklin famously said, two things are certain in life: death and taxes. The financial benefits of filing jointly will end with your divorce. And, in other news, single persons do tend to pay more in taxes. The impact may be even greater with recent tax law changes in effect in 2019. Be particularly careful about drawing from a retirement account or transferring funds from one 401(k) to another as these can have steep implications come April 15.
Rarely do couples agree on dividing the assets acquired in a marriage. The heightened emotions of divorce can cloud your better self’s instinct of what’s fair and equitable. Assets can include artwork, stocks and bonds, real estate, and more—all of which will need to be split with the end of the marriage. When you own a home with equity, the situation can be a bit trickier. Selling the residence may be required to create the necessary liquidity for your divorce settlement. In addition to a 6% realtor commission, be sure to factor in closing costs, minor maintenance or repairs, and legal fees.
Stay in Your Home & Out of Debt
Many people would prefer to remain in their home after a divorce, but the costs of separation seem insurmountable. Tapping into your home’s equity may provide the financial safety net you need and give you one less major life event to tackle
(finding a new home) amid all the other stressful items on your to-do list.
With a Hometap Investment, you can access the equity in your home to help fund the hidden costs of divorce. Unlike a loan, you’ll have no debt to repay, which means no additional monthly costs or interest to worry about. Instead, Hometap gives you the cash you need now in exchange for a share of the future value of your home. And best of all, you can keep your home.
Hometap Note: The opinions expressed in this post are for informational purposes only. To determine the best financing for your personal circumstances and goals, consult with a licensed advisor.
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Divorce is never a pleasant experience. Even with the most amicable of splits, permanent separation means unraveling your financial dependencies, which can be contentious and painful. Read on for the top five costs of divorce in order to plan responsibly for what’s to come.