March 8, 2022
Your client’s living expenses are an important piece
of the divorce process. Behind all of the negotiations
is the underlying question, “Will I be okay?”, and this
can only be answered if you know what your client
needs. Therefore, it is critical to have a good picture
of the day-to-day expenses.
Help your client to be thorough when pulling together
living expenses. For some, the task of figuring out
what they spend can be overwhelming, or just
confusing if it’s not something they have done in the
past. It can also be quite tedious! A Certified Divorce
Financial Analyst can help with this undertaking.
Beyond the day-to-day expenses there may be some
other, non-recurring expenses that should be
quantified and incorporated into the discussion.
Prompting your client to think about these may help
them avoid being hit with a bill they cannot pay.
Let’s look at what is usually the client’s biggest and
most expensive asset, the marital home. How old is
the house – will it need a new roof soon? Is the hot
water heater on its last legs or does the septic system
back up regularly? These may be repairs that are very
likely to be needed in a short time, such as the next
year or two. The spouse assuming the house should
be prepared to cover these expenses. Will that person
have enough cash on hand, or will they be able to take
out a loan? A loan could be difficult to obtain for a
spouse who is a low wage-earner.
What about a second home - if the parties are
planning on selling it as part of the divorce, does it
need some upgrades or maintenance beforehand?
Should that be the responsibility of both spouses or
just the spouse assuming the property? If the parties
are splitting the sale proceeds, they should probably
share the costs. If one spouse is covering these
expenses that person may need to be compensated
through a disproportionate share of the net proceeds.
To avoid any surprises, it is wise to have a home
inspection before one party agrees to take on a
property. An inspection will reveal problems that may
need to be addressed within a short time, or that
could be costly. While some repairs can be put off
until a future date, if the property is to be sold in the
near term it could impact the sale price. Typically (but
not in the current very hot housing market!) a buyer
will want to have a home inspection before closing.
Any large expensive repairs disclosed in the
inspection might then be deducted from the sale
price. Knowing about this will help you calculate a
realistic figure for the proceeds.
Costs associated with the divorce is another area that
could produce surprises. In addition to attorney fees
there may be court fees, re-titling, reregistration and
other legal fees and ancillary expert fees (such as the
cost of a QDRO, an accountant or an appraiser).
Thinking through all current and upcoming expenses
will help your client avoid facing an unexpected, and