6 Ugly Financial Truths About Getting Divorced

Getting divorced is expensive in more ways than one. Not only can the emotional and mental stress take a toll, but so can the financial burden. The average cost of a divorce in the United States ranges from $15,000 to $30,000, according to a blog from the New Jersey law firm Petrelli Previtera, but that can be much higher depending on where you live and what is being contested.

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The financial impact doesn’t end when the divorce is finalized, either. In most cases, it continues well into the future. Here are some ugly financial truths about getting divorced.

Unless you are involved in one of those friendly divorces where both parties agree to end the marriage but remain living together (it does happen), then one of you will have to move out. If the mortgage was cosigned by both spouses, it will likely have to be refinanced into a new loan under a single name. In this case, you or your spouse will remove your name from any ownership rights.

Collection

If you are the party who keeps the home following a divorce, you could face a hefty tax bill if you later decide to sell it. Beyond that, you will face transaction costs that might exceed 6% of the sale price.

The cost of divorce can be impacted by several factors, including the complexity of the case. The Petrelli Previtera law firm noted that costs can go up if there are unresolved issues along with additional services such as appraisals, forensic accounting or expert witnesses. Complex divorces that involve business valuation, property division and child custody “can cost significantly more than a straightforward divorce.”

As Central Bank noted in a blog, credit accounts are reported for each person associated with the account. If you are listed as a joint owner, cosigner or authorized user, you should either close the account before the divorce or have one of the names removed from it. Otherwise, you are both legally responsible for it even after the divorce.

It’s not uncommon for assets to be hidden in unexpected places while you are married because the spouse doing the hiding doesn’t want to split those assets in the event of a divorce. This is especially easy for business owners, who can more easily move assets into hard-to-find places than someone who works for a company and earns a paycheck.

Also, be on the lookout for “loans” your spouse makes prior to the divorce but doesn’t collect on until after the divorce has been finalized.

One common mistake in a divorce is making dollar-for-dollar comparisons when it comes to assets. Although the assets might seem equal on paper, they don’t always stay that way. For example, suppose you get a $40,000 car in the divorce and your spouse gets a $40,000 mutual fund. The value of the car is likely to go down in the future while the value of the mutual fund is likely to go up.