In New Hampshire, divorce can have financial implications in addition to an emotional toll. Aside from the expected costs that come from setting up an additional household, divorce and the process of separating assets can trigger other costs that often go unnoticed. Understanding and planning for these hidden costs can help divorcing couples make more informed financial decisions.
The cost of health insurance
When you no longer have health insurance coverage through your spouse’s policy, you may be able to pay for COBRA coverage for a limited time. This option is often more expensive than purchasing your own policy, however. Transitioning from your spouse’s insurance post-divorce to your own policy may result in a higher deductible, more out-of-pocket expenses and increased premiums. You may be able to take advantage of health insurance sponsored by your employer or explore other alternatives.
The cost of dividing retirement accounts
To divide a retirement account in divorce without incurring penalties from the Internal Revenue Service (IRS), you must get a qualified domestic relations order (QDRO). Expect to pay legal fees to draft and additional fees charged by the retirement plan administrator. Often, these costs can exceed $1,000. You must have a separate QDRO for each retirement account you want to split. However, IRA accounts do not require a QDRO, so if you have one, you may choose instead to divide this account. The division can be handled as part of the divorce decree or agreement.
The cost of real estate transfers
If one spouse buys out the other’s share in a home, the resulting real estate transaction can incur unexpected costs. The transaction requires a third-party appraisal of the home’s value to avoid conflict since the party selling their share would want a higher appraisal while the spouse buying them out would want a lower home value. The transfer may also involve transfer taxes. The spouse buying the home may need to refinance the mortgage in their name, incurring additional costs and a potentially higher loan interest rate.
Understanding these hidden costs is essential to safeguarding your finances after divorce. Use these insights to advocate for your financial well-being and make informed decisions.
