When divorcing spouses contemplate the financial costs of ending their Arizona marriages, they think about things like legal expenses and running a household on one income instead of two. What they often fail to consider are the hidden costs of divorce like obtaining health insurance, preparing the documents needed to transfer funds from retirement accounts, and the various fees that must be paid when real estate is transferred and mortgages are refinanced.
Health insurance and retirement accounts
Divorcees who were covered by their former husband or wives’ health insurance policies may be entitled to COBRA coverage for up to three years, but they will still be expected to make monthly payments. When they shop for new health insurance coverage, they often find that obtaining an affordable payment involves accepting high out-of-pocket expenses and deductibles. Before employment-based retirement plans can be divided in a divorce proceeding, plan administrators must be provided with qualified domestic relations orders. These documents can be costly to prepare, and several of them may be required.
Real estate and mortgages
Lenders are not bound by the terms of divorce settlements, which means the mortgage on a primary residence must be refinanced or paid off if one spouse buys the other out. If it is not, the spouse who gave up rights to the property could be pursued for payment months or even years later. Arizona does not collect a real estate transfer tax, but divorced spouses who take out mortgages are usually required to pay application and appraisal fees and cover closing expenses like title insurance and recording costs. These hidden divorce expenses can add up to thousands of dollars.
Preparing for the hidden costs of divorce
The hidden costs of divorce can come as a shock to spouses who are focused on getting though the process quickly so they can start new lives. If you are thinking about filing for divorce and would like to avoid unpleasant surprises, you should consult with qualified experts like retirement planners, accountants and mortgage specialists. They could tell you about the hidden costs you are likely to encounter and suggest ways to prepare for them.