It it silly to think that had the marriage lasted the “hot and heavy” aggression would have been kept behind closed doors instead of feeling like you’re getting screwed during the divorce. Now that the separation papers are filed you are in for a rude awakening and this article will tell you three ways I see clients get fleeced, pretty regularly, during the divorce process.
Key takeaways
- Professional fees come out of the marital estate. Arriving organized, with a list of income, expenses and assets, keeps those fees down.
- For agreements signed after 2018, alimony isn’t deductible for the payer or taxable to the recipient, which shifts the tax cost to the higher earner.
- The dependent exemption is gone for good. The Child Tax Credit of $2,200 per child phases out at higher incomes, so who claims the children is worth negotiating.
- Dividing retirement assets through a QDRO can sometimes do more for both spouses than larger alimony payments.
The Enemy Of Divorce
The scene opens as the hero begins putting on their armor as they prepare for battle. A little bruised the hero reaches for their weapons, turns to their team, and shouts “Let’s do this!”
Someone shouts “Are we getting paid for this?”
Confused, the hero slowly turns to the vocal individual and says “Doing the right thing is priceless! Now who’s with me?!?”
The team mumbles amongst themselves, turns to the hero and says “Thanks but I can’t pay my bills for always doing the right thing.”
This is what I think when someone asks a professional for free advice. Of course we all want to give you advice for free! But there is one small problem…money always seems to get in the way of doing the right thing and paying the bills. But the reality is, money makes the world run and therefore is required to fulfill an obligation.
How many of you have heard the saying “There is no such thing as a free lunch?”
Well the concept is well-known amongst those having taken economics in college. Milton Friedman quite simply stated that in the world we live in today “there is no such thing as a free lunch” which roughly translated into “you cannot get something for nothing.”
This concept is never more true than when you need the help of a professional to wade through some of the frustrating points in your divorce. Sadly, when you are going through one of the most emotional times in your life, paying the professional to dissolve your marriage seems like salt in the wound.
This makes me wonder, is there a better way?
While we are not attorneys, we can tell you from our divorce financial planning work that the more active a client is in their divorce the easier it is on the process and the less they may pay in legal fees (in my experience). Let me give you an example:
Imagine your attorney files for discovery and requests your soon-to-be ex to provide their financial documents, along with other documents. When they receive them the attorney is going to have a paralegal (or assistant) review the files and compile the data into something digestible. Once complete they will want to review the files with you and determine if there is anything missing.
Now if you are not prepared or do not know where your assets were prior to filing for divorce then you might not have any clue what you are looking at. Therefore you might shrug and assume what you are looking at is fact. But what if it wasn’t? What if in fact there was something missing? How would you know?
This is where compiling a list of your income, expenses, and assets before filing for divorce or separation will be immensely valuable. Had you compiled a list of your household’s overall financial picture prior to separation then you would have a pretty good understanding of where everything was and whether your soon-to-be ex is hiding anything.
More importantly, being prepared and taking an active role in the process can actually save your attorney time which in turn can save you money because they shouldn’t need to do as much leg work.
The professionals you hire should not be viewed as the enemy but as a resource at your disposal. When used correctly they can be quite valuable in the divorce process. But when you are not prepared you can expect their fees to climb as they have to do extra legwork to compile, evaluate, and prepare documents that will be used to help divide your assets. That means instead of dividing more of your assets between you and your spouse, you will be dividing your assets between three parties: you, your ex, and the professionals both of you hire.
Being prepared with facts, figures, notes, and goals heading into your professional’s office will only benefit you and the process. Otherwise, be prepared for a higher bill at the end… in which I have heard people say “I am being screwed out of my own money by….”.
Alimony
It amazes me how many times people say they are either entitled to alimony or will be forced to pay it. Frankly, alimony should be viewed as a resource to help the low-income earner get back on their feet after the divorce. Whether that resource is paid upfront or paid out over a period of time, I do not subscribe to it being viewed as a “penalty” for getting divorced.
That being said, the tax law has made this argument more complicated.
For divorce or separation agreements signed after December 31, 2018, alimony is no longer deductible by the person who pays it and is no longer taxable income to the person who receives it. Agreements signed on or before that date generally keep the old rules, where the payer deducts alimony and the recipient reports it as income, unless they are later modified to adopt the new treatment.
In practice, that shifts the tax cost to the higher earner. Every dollar of alimony is now paid with after-tax money, usually taxed at a higher bracket than the recipient would have paid. A payer in the 32% federal bracket, for example, has to earn about .47 before tax for every of alimony.
That makes the size and structure of alimony a tax question as much as a legal one. Alternatives, such as a larger share of retirement assets divided without immediate tax through a qualified domestic relations order (QDRO), may leave both spouses better off.
Taxes
The 2017 tax law also eliminated the personal exemption for dependents, which used to be a valuable deduction for whichever parent claimed the children. The tax law signed in July 2025 made that change permanent, along with the lower tax brackets that had been scheduled to expire after 2025.
In place of the exemption, families rely on the Child Tax Credit, now ,200 per qualifying child under 17 and indexed to inflation. It phases out above 0,000 of modified adjusted gross income for single filers and heads of household (0,000 for joint filers), so a high-earning parent may receive little or none of it.
Only one parent can claim each child in a given year. Generally that is the custodial parent, but the custodial parent can release the claim to the other parent using IRS Form 8332. Who claims the children is one more point worth negotiating with your tax picture in mind.
Conclusion
What does this mean? While the divorce process is arduous you absolutely need to be prepared, before you file for divorce, in order to make the lives of the professionals you hire easier. Making their life a little easier should translate into less work for them to do which should save you money — assuming they are not in the business of nickel and diming you in other ways. During the divorce proceedings it would be wise to negotiate less alimony due to the additional tax burden you will be faced with. Lastly, get ready for the big tax bill you will inevitably face. Brace for impact now so you are not surprised later.
The opinions voiced in this material are for general information only and are not intended to provide specific individualized tax or legal advice or recommendations for any individual. We suggest that you discuss your specific situation with a qualified tax or legal advisor.
Put this into practice
For educational purposes only. This content is provided for informational purposes and should not be construed as legal, tax, investment, or financial advice. Please consult qualified professionals regarding your specific circumstances.