Kelly Bullis: A couple of hidden costs of divorce

When you think of how to split up a marital estate, the most obvious issue come to mind. Who gets what and the kids?

I’ve seen divorces where the husband wants the expensive wedding ring back or to have its value offset some other asset. I’ve seen divorces where the poor children are drug into court to force them to pick which parent they want to live with.

But what about health insurance? If you were previously covered under your spouse’s employer-based health insurance program, finding health insurance for yourself can be a costly adventure. You need to analyze premiums based on deductibles, out-of-pocket expenses, etc. COBRA coverage from the former spouse’s health insurance plan may be available for up to 36 months after a divorce, but it is usually more expensive than the price paid when you were married to your spouse.

Warning! State health insurance exchanges are a nightmare to navigate. You are usually coached to estimate your annual income as low as possible, to get the most premium credits, lowering your monthly cost. The problem with that is that you will probably make more than you think and when you file your first tax return as an unmarried person (with higher tax rates, etc.), you may find yourself having to pay back a substantial amount of those premium credits. I had one client who didn’t factor in the taxable gain on selling a joint rental property and owed almost $30,000 of premium credits back when she filed her tax return.

What about retirement accounts? There is a “vehicle” that is designed to assist in transferring funds from one spouse’s workplace retirement plan to another. It’s called a “qualified domestic relations order” or QDRO for short. This is a legal document that outlines how retirement assets should be divided. There needs to be a separate QDRO for each company retirement plan being divided.

Paying for a QDRO could get expensive. Be aware that each side’s attorney may want to play with the numbers by assuming higher earnings rates on the spouse and lower earnings rate on themselves, playing with life expectancies, etc. (That way you get a larger chunk of the former spouse’s plan and you give up less of your own.) Negotiating QDROs can become a time consuming and expensive part of a divorce.

There are many more “land mines” to getting a divorce, no space to write about.

There you go, just a few items, trust me there are a lot more. So next time you get mad at your spouse, maybe count to 10, calm down and consider finding a way to save the marriage instead of choosing the seemingly “quick” idea of just getting a divorce.

Have you heard? Mal 2:16 says, “One who hates and divorces, says Yahweh, the God of Israel, ‘covers his garment with violence!’ says Yahweh of Armies. ‘Therefore pay attention to your spirit, that you don’t be unfaithful.’”

Kelly Bullis is a Certified Public Accountant in Carson City. Contact him at 775-882-4459. On the web at BullisAndCo.com. Also on Facebook.