Divorce Can Impact Finances
Most people are aware of how divorce can affect a person emotionally and socially. Few people consider the changes that divorce can bring to a person’s financial situation, however. People considering divorce should be aware of the ways that divorce may impact them financially.
When married people split, they create two households where there was previously only one. As such, they necessarily double their living expenses such as rent or mortgage payments, utilities, groceries, homeowner’s or renter’s insurance, health insurance and maintenance. Furthermore, many people who were used to living on two incomes now have to adjust to living on one income.
People may not realize the tax implications that divorce may have. In some cases, couples have to liquidate assets in order to be able to divide them, so they sell things like homes and stocks. If people make money on such sales, they may have to pay capital gains taxes. Similarly, if people need to withdraw funds from retirement accounts as part of a property settlement, they may end up paying not only income tax on that money – since such deposits are made with pre-tax funds – but they may also have to pay early withdrawal fees if the parties are younger than 59 1/2 years old and they do not have a properly drafted Qualified Domestic Relations Order.
Finally, divorcing couples with children will notice an impact on their income taxes when they claim dependents. In many cases, parents alternate years in claiming children as dependents after a divorce.
Even after the divorce is final, ex-spouses may continue to have a financial relationship. Some spouses will have to pay the other alimony. In marriages where there are children, the non-custodial parent will usually have to pay child support to the other parent.
Unless parties proceed through their divorce pro se, wherein each spouse represents him or herself, they will each need to pay attorney fees. There is no “typical” cost of divorce, but spouses who cannot reach agreements on issues such as property division, child custody, visitation and support payments will generally incur higher legal fees because their lawyers will spend more time on their cases.
Even couples who divorce amicably will need to pay some fees for attorneys to draft divorce decrees, filing fees and court costs.
Divorce brings a lot of change to people’s lives. Navigating those changes is easier with the guidance of an experienced attorney. If you are considering divorce, talk to a qualified family lawyer today.