Post-Divorce Financial Problems

by | Dec 26, 2023 | Financial Assets

When a marriage ends in divorce, finances are just one aspect of the major upheaval both parties will face. Splitting one household into two has obvious costs that inevitably influence negotiations as you try to reach an equitable asset division agreement and prepare to grapple with your financial responsibilities after divorce. Unfortunately, though, it’s often the case that those in the middle of divorce proceedings, under severe stress and dealing with strong emotions, don’t think about foreseeable but less-obvious costs that can erode the value of their settlement and support. Here’s what you should consider to avoid taking an unexpected financial hit when you can least afford it.



Worried About The Financial Problems That Divorce Might Cause?

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How Planning Now Affects Your Finances Later


Some of the financial impact of divorce is easy to anticipate—the increased cost of each ex-spouse having a separate home, with the associated mortgage or rent payment, for instance. Similarly, couples expect to divide the marital property, after distinguishing separate property from joint assets. But they don’t always look beyond the immediate situation to think about how the decisions they’re making now or changes that can’t be avoided will affect their finances down the road.


One critical area to consider is how costs will be divided post-divorce, especially if there are children involved. The court may determine who is responsible for paying child support and providing health insurance for the children, but your agreement should also cover shared expenses beyond the basics covered by child support (such as the fees for extracurricular activities or medical expenses not covered by insurance). You should also clearly establish how those agreed-upon costs should be divided when there’s a significant disparity in incomes, so the financial responsibility is proportional rather than a straight 50-50 split.


A knowledgeable family law attorney is crucial for setting you up for financial success post-divorce because they can anticipate such issues to help set up a plan that lays out clear expectations. While it may feel easier—and be initially less expensive—to gloss over the details to get an agreement in place faster, it can be far more costly to try to fix the gaps that allow your ex to stick you with more than your share of the expenses down the road. The right legal counsel will pin down the language to eliminate casualness and ambiguity that lead to trouble later.


“Hidden” Fees and Taxes Post Divorce

post-divorce financial problems

The saying “the devil is in the details” is all too applicable regarding the possible pitfalls of property division in divorce. It is entirely possible for a couple to scrupulously split up their assets in a way that seems equal, based on their current value, only to be hit with fees or taxes they didn’t anticipate that take a significant bite out of what they thought they received. This most often happens when they liquidate assets they acquired in the divorce. Consider:

  • A low cost basis in assets such as stocks can result in higher capital gains taxes.
  • An investment held for a year or less will incur short-term capital gains taxes, which are higher than long-term capital gains taxes.
  • A real property kept in the divorce will likely require commissions, closing costs, deferred maintenance costs, staging fees, etc. if you need to sell it shortly afterward.

While these aren’t exactly “hidden” expenses, they may not be top of mind when negotiations are in progress. Having the right professional legal and financial advice during divorce can help you avoid overlooking these types of issues, which can ultimately leave you with an unequal share of marital property.


Other costs, some significant, can come as a surprise simply because the parties haven’t thought through the details of what separating their finances and moving on as two single people entails. For example:

  • Having to file taxes as Single rather than Married can produce an unexpected tax hit, especially if you fail to update your payroll tax withholdings.
  • A separate cell phone plan can be more expensive than having one line on a shared family plan.
  • Increased interest rate when refinancing a mortgage to remove the other spouse from the loan. 


Finally, certain one-time fees associated with divorce may be small on an individual basis but add up when taken altogether. These can include:

  • Onboarding and transfer fees charged by financial institutions if you’re moving your accounts away from the bank or brokerage firm that your ex is staying with.
  • Nominal title transfer fees charged by government entities as you change or correct asset titles.


Securing Your Financial Future


Adjusting to a new financial reality after divorce is rarely easy. However, you can take action to face the challenges involved and preserve your financial well-being. This should start with updating your existing accounts and opening new ones as necessary. Review your insurance coverage to verify that it is accurate and that you’re not paying to insure assets you no longer own, and update beneficiaries on all accounts.


Post-divorce budgeting is also key to keeping your expenditures within your new income. Take a close look at your bills to determine where you can reduce expenses to help balance unavoidable increases for necessities. If possible, building an emergency fund should be one of your budget priorities to protect yourself in the case of job loss or other financial setbacks. Investing in the services of a financial advisor at this point can be invaluable in setting a sustainable budget as well as creating the right strategies for dealing with debt, managing your investments well, and planning for retirement.


Ultimately, your financial situation after your divorce is finalized will depend greatly on how property and support is awarded in your settlement agreement or court order. Thus, working with a skilled lawyer who understands your financial goals and your individual circumstances is one of the most important steps you can take to safeguard your financial future.


Looking After Your Interests in Divorce


If you’re worried about the financial problems that divorce might cause, the experienced family law attorneys at Hoover Krepelka can help. We understand the complexities of resolving support and property division issues and will work tirelessly to provide expert guidance and assert your rights. To schedule a consultation, fill out the form below today.

*The above is not meant to be legal advice, and every case is different. Feel free to reach out to us at Hoover Krepelka, LLP, if you have any questions. Information contained in this content and website should not be relied on as legal advice. You should consult an attorney for advice on your specific situation. 

Visiting this site or relying on information gleaned from the site does not create an attorney-client relationship. The content on this website is the property of Hoover Krepelka, LLP and may not be used without the written consent thereof.


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