The Real Cost of Divorce

The Real Cost of Divorce

The Real Cost of  Divorce

At cBridge, clients ask us a lot of questions, most of which can be answered with two words: "it depends", since we all know that no two divorces are identical. When they ask (and they almost always do): "how much will my divorce cost?", usually they are referring to the most obvious cost of divorce: the legal cost.

Certainly the cost of retaining quality legal counsel should be a high priority.  You need someone who will provide good legal advice, someone who has depth and breadth of experience in the jurisdiction that you'll be filing, and someone who has your best interests at heart.  But there are a whole host of other types of costs that aren't always top of mind when starting the divorce process, some of which are explicit costs, but many are more hidden.

Tax Costs

Many people don't realize that their divorce will have both short and long term implications on their taxes.  When dividing the assets, you'll need to understand the tax status of each asset to help decide if which ones you should be asking for - otherwise you may get hit with tax costs  down the road.  For example, investment and retirement assets can vary greatly in their tax status.  Traditional IRA and most 401K plans will be 100% taxable when you withdraw from them.  Non-Qualified Annuities and taxable brokerage accounts are only taxed on the gain, so it's import to know the cost basis of the account (generally that's how much you bought it for).  Roth IRA withdrawals are tax free, which makes them particularly attractive.

If you have real estate, there will be tax impact to whoever keeps the property.  This is true for the primary residence, and even more so for any investment properties you may have.  The tax scenario may be different if you want to stay in the house long term, stay there and sell it after a couple of years, sell it as a married couple, or turn it into a rental property.

A CPA can also help determine who should take the kids as a dependent - many people think the higher earner should take the dependents, but they may not get certain tax credits, including tuition credits, if their income is too high.

Paying a competent accountant to review the situation is the best way to have the information you need to make decisions that will help reduce your tax cost now and in the future.

Check back for future blogs about the costs of divorce. For learn more, cBridge will be holding a panel discussion on how to have a Cost Effective Divorce on April 25, 2017 at 7pm at the Doylestown Library, 150 S. Pine St, Doylestown PA 18901.  For more information see


cBridge support is an organization of professionals dedicated to helping you through your Doylestown, Bucks County and Montgomery County divorce.

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