Episode Description - The Hidden Health Insurance Trap That Can Make Divorce Unaffordable
You don’t lose money in divorce because you’re bad at math. You lose it because you make huge financial decisions while you’re emotionally overwhelmed and financially uneducated. In this podcast episode, Leah Hadley, an accredited financial counselor, CDFA, and mediator, pulls back the curtain on the hidden health insurance traps and tax law changes scheduled to take effect in 2026 that may dramatically change your post-divorce financial future.
Leah explains how the tax and healthcare changes in the One Big Beautiful Bill Act may impact the amount you pay in taxes and, most significantly, in health insurance.
For example, experts are predicting that healthcare costs could increase by $1,000 or more per month in 2026 for those on marketplace insurance, making healthcare unaffordable for a significant percentage of the population. (… and that’s just ONE of the changes coming down the pike!)
On top of that, 2026 will bring tax law changes that, depending on your circumstances, can either make your financial future brighter or significantly more challenging.
Whether you’re just thinking about divorce or you’re already in the thick of it, understanding the changes that Leah explains in this podcast episode will be critical for your financial future.
Show Notes
About Leah
Leah Hadley is an Accredited Financial Counselor®, Certified Divorce Financial Analyst®, and Mediator who helps women navigate major life transitions with confidence and clarity. She’s the founder of Intentional Divorce Solutions and Intentional Wealth Partners, where she blends financial expertise with empathy to empower clients to make values-aligned decisions about their money and their future. Through her Intentional Divorce Insights podcast and workshops, Leah inspires women to create financial and emotional stability after divorce and beyond.
Connect with Leah
You can connect with Leah on LinkedIn at Leah Hadley and Facebook at Intentional Divorce Solutions. You can follow Leah on Instagram at Intentional Divorce Solutions, on YouTube at Intentional Divorce Insights and on her Podcast Intentional Divorce Insights. To find out more about Leah’s work, visit her website at Watch Her Thrive.
Key Takeaways From This Episode with Leah
- Leah Hadley transitioned from teaching to finance after experiencing financial struggles and now blends her background in education and finance to help others navigate major life transitions with confidence.
- Despite her financial expertise, Leah found her own divorce overwhelming, which inspired her to specialize in divorce financial planning and support others facing similar challenges.
- She works as both an advocate and a neutral mediator, helping clients manage sensitive financial decisions while recognizing when emotions may cloud judgment.
- Leah advises clients to pause decision-making when emotions are high and revisit choices with a clear mind to ensure sound, well-grounded decisions.
- Starting financial planning early in the divorce process allows people to better manage emotions, understand their finances, and make informed, values-based choices.
- The Big Beautiful Bill Act (2025) may significantly raise healthcare costs due to expiring subsidies and reduced Medicaid funding, especially for those losing spousal coverage after divorce.
- Individuals should consult health insurance brokers early to explore options like COBRA or marketplace plans, since coverage can end immediately upon divorce or even separation.
- Temporary tax changes under the new law—such as partial exemptions for tips, overtime, and adjustments to child tax credits—offer short-term benefits but could change again soon.
- Leah urges clients to carefully assess whether keeping the marital home is financially realistic, considering refinancing at higher interest rates, ongoing maintenance, and living expenses.
- She encourages a mindset focused on risk awareness, cash flow clarity, and adaptability, recommending annual financial reviews to stay aligned with evolving tax and economic conditions.
Do you like what you've heard?
Share the love so more people can benefit from this episode too!
Transcript
The Hidden Health Insurance Trap That Can Make Divorce Unaffordable
SUMMARY KEYWORDS
Big Beautiful Bill Act 2025, healthcare after divorce
SPEAKERS
Karen Covy, Leah Hadley
Karen Covy: 0:10
Hello and welcome to Off the Fence, a podcast where we deconstruct difficult decision making so we can discover what keeps us stuck, and more importantly, how we can get unstuck and start making even tough decisions with confidence. I'm your host, Karen Covy, a former divorced lawyer, mediator, and arbitrator, turned coach, author, and entrepreneur. And now without further ado, let's get on with the show.
With me today, I have the extreme pleasure of speaking with Leah Hadley. Leah is an accredited financial counselor, certified divorced financial analyst, and mediator who helps women navigate major life transitions with confidence and clarity. She's the founder of Intentional Divorce Solutions and Intentional Wealth Partners, where she blends financial expertise with empathy to empower clients to make values-aligned decisions about their money and their future. Through her Intentional Divorce Insights podcast and workshops, Leah inspires women to create financial and emotional stability after divorce and beyond. Leah, welcome to the show.
Leah Hadley: 1:22
Thank you so much for having me. It's really my pleasure to be here.
Karen Covy: 1:26
Oh, I am so excited, and there's a million things I want to talk to you about. You know that. But first, what I'm curious about is what got you into this? Why financial advising? Why divorce? Start wherever you want to start.
Leah Hadley: 1:41
Well, it's a long and winding road, Karen. But um, I was raised by a single mom. My parents divorced when I was eight years old. Um, and my brother, my mom was married prior to that, and my dad was married prior to that. And so back then, that was pretty unusual to have a family with lots of like half siblings and things like that. Um, and so I grew up in that experience, being completely normal to me, because that was the experience I was growing up in, right? Um, but finding that it was unusual and kind of went about. I ultimately decided that I really wanted to be a teacher. I got my master's degree in education, um, my undergraduate degree was in sociology. I love education. I'm very committed to education and the work that I do, but I got really burnt out in the classroom, Karen. And I was teaching for Baltimore City Public Schools and it was just a rough, rough area. And I took a temp job. I was drowning in student loan debt at the time. And um, here I was feeling like an educated individual and like, oh my goodness, how am I gonna pay my rent, right? If I'm not teaching. So I took this temp job. It was at an investment bank in Baltimore. And when I walked in that first day, I felt like everybody around me was speaking a foreign language. I was sitting here with a graduate degree and had no clue what they were talking about. I wasn't familiar with stocks, I wasn't familiar with bonds. I had no idea how people build wealth, right? I was very fortunate in that my mom was an accountant. So I was raised in a home where we were comfortable talking about money. It wasn't like a topic that was off the table. But I also wasn't raised in a house with wealth that would require the assistance of a financial advisor, right? So this was all very, very new to me. Um, and one of the things that I share with people all the time, it's the same thing going into the divorce space, right? There's this whole vocabulary that you have to be able to learn in order to really communicate about your case. And here you are going through this huge life transition and you're just overwhelmed by the language alone, right? Like it can all feel very overwhelming. Um so I remember that experience really well. And it's one of the reasons why I love working with individuals and families. I was very fortunate that I had some wonderful mentors at that investment bank and actually kind of grew up in the equity research department. I became a publishing equity research analyst. So I was covering, you know, stocks for big institutional investors. And then I was ready to have my own family and decided that, you know, the travel and the commitment to the career that I had just wasn't going to be in alignment with what really mattered in my life. And so I decided to go and work at um, you know, as a financial advisor with individuals and families. I was with a big firm and they had a way of doing business, Karen. Um, and for a lot of people, it works fine. That's great. Um, but I love to be creative. I love to really meet people where they're at. Um, and so I quickly found that wasn't going to be a good fit. And I tried another bigger kind of um broker dealer, ran into some similar kinds of issues with compliance and limited ability to kind of help people the way I wanted to. Then I went through my own divorce. Um, and here I was, a financial professional. At that point, I had been in the financial industry for probably almost 10 years at that point. And Karen, it didn't matter. The financial decisions that I was making through my divorce were completely overwhelming, even though I had that background. And it was a couple things, right? It was number one, first and foremost, this was just a challenging timing of when I got my divorce. My ex-husband and I bought our house in 2007. You know, the market crashed in 2008, and everybody lost so much value in their homes. So our work, like our house was underwater for a long time, right? And so it wasn't a matter of who gets to keep the house. It was who is stuck dealing with the house in our situation, right? Um, so it was it was really difficult from a financial standpoint. And like I said, I had all of this history, been working as a financial advisor. I had even done some work to learn about how financial advisors support people through the divorce process. And here I am sitting in my own divorce, facing the same issues that my clients were, but in such a way that like I couldn't make the, like, I couldn't advise myself. I couldn't make the decisions, right? And so I think that the space, especially as it relates to the financial decision making, is just so critical to have that support of somebody who really understands like what we talk about financial planning and divorce, it's like financial planning on steroids. It's not your general kind of run-of-the-mill. It's we're looking at so many different scenarios and what are the tax implications of this and different kinds of assets in every case. And it just, it's a really fascinating space to be in. But at the end of the day, it is so personally rewarding to be able to help people when they are in this time when they can't necessarily think and make these decisions for themselves, to give them concrete guidance and information so they can feel good about the decisions that they're making.
Karen Covy: 6:34
I love that. I am totally blown away. Seriously, um, because financial decisions, I mean, finance is such a big part of divorce. Um it's it's as big, if not bigger, than the legal part of divorce. And what's interesting is that even as a financial advisor, you were so overwhelmed you couldn't make the decision. So what I'm curious about is how do you help your clients make those decisions when A, they don't have the background that you do, and B, um, they're so emotionally overwhelmed that they like you, they just can't they can't see the forest for the trees. How can somebody in that situation start wrapping their head around their finances?
Leah Hadley: 7:22
Yeah, that's such a great question. And even I was thinking about a conversation I had with some clients yesterday. You know, sometimes I work as an advocate, which means I'm working for one of the uh parties that's going through a divorce, but sometimes I'm working as a neutral, which means I'm working with both parties, helping them to figure out the finances. And in this particular case, yesterday, I was working as a neutral with both parties, and we were talking about a very sensitive topic, and there were tears involved, which is, you know, it's totally normal. But one of the things that I said to them was, you know, I feel like the emotions are really running high right now. I don't think this is the time for us to be making decisions. You know, it's fine for us to be gathering information, it's fine for us to be talking this through, but I'd rather table a decision at this point until you've had some time to process that emotion and you're ready to come to the table with a clear head. And I think it's really important to acknowledge that. Like there are moments in time when you're feeling emotional and that's not the right time to be making these decisions. And that's okay. That's okay. There's so much pressure, whether we're putting it on ourselves or we're receiving it from opposing side or whatever, so much pressure that people feel throughout the whole process of like, I gotta do this now, I gotta do that now. Okay, this is like a huge, huge change going on in your life. Like, let's let's take a step back, let's take a deep breath, like make sure that we can really approach it with a clear head. And so that's what I talk to people about is when we're talking about the numbers, when we're talking about the money, we want to come to it from a place with a clear mind. And I also tell people, Karen, we can go over this three, four, five times. I don't care how many times we have to go over it. Because the fact of the matter is, you might be in a situation where you're learning about your finances for the first time. You may not have been involved with the family finances. I was in a situation where I was responsible for the family finances and I was still feeling completely overwhelmed with these decisions, right? So imagine if you're somebody who's coming to this completely new, right?
Karen Covy: 9:15
Right. 100%. And what you're saying, you are so preaching to the choir. I mean, I love what you're saying. And what I want people to hear from this, though, is that you have to, you, you, you have to plan. I mean, you have to make these decisions and you need to clear your, I a hundred percent agree, you need to clear your head, deal with your emotions first before you can make the decisions. But if you let your emotions overwhelm you until you're at the last minute, now you're going to have to make a decision without a clear head when you're an emotional wreck. So it's so important what you do to start for people to start with you early in the process so they can start managing their emotions, understanding what's going on, ask you those questions two and three and four times, go over the same thing so that it finally sinks in, and then they're in a place to make a good decision.
Leah Hadley: 10:10
You're exactly right. You are exactly right. And the other thing that I tell people is it is a process, right? Like divorce isn't like, hey, you wake up one day and you're divorced, right? And so you may decide, and I see this with clients all the time, where it's like at the beginning of the process, I am so attached to the marital home and can't even imagine any other living situation at all. And by the time you're through that process, it's like suddenly, hey, I want to buy my own space. I want to decorate, I want to feel ownership over this place. I don't want to necessarily be living in the space with all the memories of everything that we, you know, had and that, you know, didn't necessarily work out. And that's okay too, right? And that's the other piece, is I feel like people get kind of stuck in like, well, I said this, so now I'm kind of stuck here. But that's not the case. As we get more information, as we process through these feelings, as we look at different financial scenarios, we may find there's something that's going to be better for you. And that's great. That's great information, right?
Karen Covy: 11:10
Yeah, that is so important for people to get. And I don't think enough people or enough divorced professionals talk about it. I had a mentor, and her way of helping people through this, you know, I said something, now I'm stuck with it for life kind of scenario was she would talk about what's your current thinking. And that, but just by doing that takes the pressure off and gives you the breathing room to make a decision when you don't feel like you're going to be stuck with this for the rest of your life. You go, oh, my current thinking is blah, blah, blah. And then you change your mind when you get more information. This is so, anyways, I this is a nice segue into what I'm just dying to talk to you about, which is the big beautiful Bill Act and the changes that it made to tax structure, because as you and I both know, taxes are a super important part of divorce. Not taking into account the tax implications of a settlement or support moving forward can completely change your financial future. So let's start with, I want to get to the homeownership part of it and what you know, what the implications might be there. But I really, really want to start with healthcare because I see this as like we're on the train tracks looking at the light coming towards us, and people don't or might not realize that they're about to get hit by that train. So can you talk a little bit about the Big Beautiful Bill Act and how what it did with respect to health insurance moving forward?
Leah Hadley: 12:48
Yeah. So the One Big Beautiful Bill Act passed in early July. And I've heard of it, you know, we had the TCGA, the Tax Cuts and Jobs Act in like 2017, had all of these provisions that were going to expire in 2025, right? So something had to happen. Um, or uh we would have been in a very, very precarious situation come January, right? So we knew that there was going to be some negotiation happening around like what's going to happen with all of these things that are set to expire at the end of this year. But one of the big things that was set to expire was the some of the healthcare subsidies, right? And so that is very much up in the air right now, especially with the government shutdown and you know, everybody's sort of in this space of disagreement. But at this point in time, when we are recording this, the um the subsidies are set to expire. And uh, you know, there are still going to be uh some, but it's it's gonna be harder and harder to get those. And there was a significant, and we've already seen the significant reduction in Medicaid funding that has reduced Medicaid availability for many Americans. And so what we're looking at is for a lot of people, a substantial increase in their health care expenses, just insurance. We're not even talking about like the actual health care itself, right? We're talking about the protection from these big expenses that we might not have the funds to cover, right? Um, and so this is a scary place, especially because, and why we're talking about it in the context of divorce specifically, a lot of people have to make changes to their healthcare coverage as a result of a divorce. Maybe they're on their spouse's um insurance and they have to get their own insurance, or maybe you know, there's been a change, they're moving, or there's been an employment change. There's so much changes when people are going through this divorce, right? But when we're talking about an increase in health insurance costs, Karen, I'm talking in some cases like $1,000 a month plus. We're not talking about a couple hundred dollars, which would still be a lot for a lot of people, but we're thinking in some cases, these increases that we're seeing are like the size of a mortgage payment for some people. These are huge increases.
Karen Covy: 15:04
That's crazy. So it it sounds now. Does this just for people who are listening who may not be as savvy with health insurance? Um, does do these changes simply apply to the people who are on the insurance exchange, the people that who are taking advantage of Obamacare? Does it apply all the way across the board? Does it apply, who does it apply to?
Leah Hadley: 15:28
So the subsidies specifically, we're talking about the marketplace. That's the subsidy specifically. Okay. Now, with that being said, we're seeing increases in health insurance costs across the board. So even I've been looking at plans for my employees, you know, starting in January, and we're already like, oh my gosh, like the costs have gone up so much from 25 to 26, and trying to figure out like what portion of it can we afford and all of that. So employers are definitely dealing with this as well. But I think where it's really gonna shock people is going to be when they're when they're on the marketplace and they're not seeing the subsidies that were available previously.
Karen Covy: 16:05
Yeah. And so the people, it sounds like all of the premiums are gonna be going up, which I mean they never go down. Right. Um, but to go up so dramatically is crazy. So if somebody, let's say somebody's thinking about getting a divorce, right? They haven't pulled the trigger yet. How can they figure out what their health insurance options might be or what the premiums might be?
Leah Hadley: 16:35
So I highly, highly encourage people to talk to a health insurance broker. You don't have to pay a health insurance broker to talk to them. They do get paid by the various insurance companies. That's how they're compensated. But I think they really have their finger on the pulse, especially if you're talking to a good one, about the variety of options that are out there. And they're gonna look at things like, okay, does Cobra make sense for you for a period of time? Cobra can be very expensive. That's the coverage that you might continue after, let's say, you were on your spouse's plan, you have the opportunity to be on Cobra for a period of 36 months after you get off that plan. Now, if you're on your own employer's plan and you're getting off, you just have the 18 months if you're changing jobs. But regardless, Cobra is an option. Now, when you're paying for Cobra, you're paying both the employee and the employer premium. And so for some people, they don't necessarily realize how much their employer is spending. Um, so that can be a shock in and of itself, but it is an option that's available to people. There are short-term solutions that some people, for some people might work for a variety of reasons. Even some of the health insurance brokers will help you to understand the health share programs, which may or may not be a good fit. But I think in in cases where you're considering going without insurance, I think it's better than nothing. Um, so you know, that's something to look at. That's going to be a lower cost, more economical option. But I think those brokers can really walk you through the variety of options that are available. You know, even the broker that I'm working with for my company, you know, that that individual is helping us to see, like, if we join this association, what opportunities, you know, so they really are great, um, a great source of education information. Um, and so I encourage people well before the divorce is final to sit down with somebody, have that conversation and say, what are the options? What are we even talking about? Now, really good brokers are gonna ask you about your health conditions, what you know, medications you take, things like that. So they can really do a thorough analysis for you and help you to understand based on your situation and your needs, this is gonna be the solution and this is gonna be the cost.
Karen Covy: 18:43
Yeah, that makes sense. And I think one thing I hope people hear from this or they will hear now is that you can't stay on your spouse's health insurance through an employer after the divorce. Um, so you're gonna have to do something and not factoring in the cost of what that something is, you know, before you sign on the dotted line, so to speak, can have like tremendous implications financially for you.
Leah Hadley: 19:14
And the other thing that I was really surprised about, Karen, and I just learned about this from a case that came across my desk, was that there are some employers, even if you're separated, they will not allow you to stay on um your spouse's insurance. And in this particular case, these people did not know this. She underwent surgery and ended up with some very large bills. Now, fortunately, it was an amicable divorce, and he was able to assist, which was very grateful for that. But don't put yourself in that situation. Make sure you know the rules and make sure that you're consulting with somebody to make sure you're covered.
Karen Covy: 19:49
Just out of curiosity, was that an official legal separation or they just lived in separate houses?
Leah Hadley: 19:54
Oh, they just lived at separate addresses. Um, he was uh a tradesman, so he was part of a um uh a union. A union. Um and they, you know, had their own rules around who could and couldn't be covered. And in this particular case, she was not able to be covered.
Karen Covy: 20:11
Wow. Word to the wise. So for anyone, you know, for those of you who are listening, if you're even thinking about living in separate places, I never thought of that. I thought it had to be a legal separation because I know back in the day, that was one reason why people would get legally separated was for health insurance premiums. And then the employers started, or the insurance companies, actually, not the employers, started closing up those loopholes and saying, no, if you're legally separated, you can't get insurance through your spouse. So that ended that. But I didn't know that even moving out could trigger that.
Leah Hadley: 20:43
Well, and even this happened to me. I had um a test on a very expensive test on the day after my divorce was final. And we had already paid our health insurance premium for the month. So I thought I was covered. Financial advisor here thought I was covered for the month because the premium had been paid. And I was wrong that that the day the divorce was final was that now I was very fortunate. I wrote a letter to um, you know, the healthcare provider and they were able to reduce the rate for me. So if you're in a situation like that, always ask, always ask. You know, what can they do? But um live and learn. So you definitely want to make sure if you have anything coming up and you're in that transition period that you know if you're covered or not.
Karen Covy: 21:23
Wow. I would have thought, I would have thought the same thing. Hey, we paid the premium, I'm good for the rest of the month. And you know, and for those people who are thinking that, oh, maybe I won't, I just won't mention that I got divorced yesterday, that's called insurance fraud. And you don't want to do that, right? So that makes everything even worse. That's crazy. So besides health insurance, what other areas does the one big beautiful bill act, what other financial areas could it affect for somebody who is going through a divorce?
Leah Hadley: 22:01
Well, I think the big two that are sort of being celebrated this year is for those of you out there who are earning tips or you're earning overtime, um, there may be an opportunity if everything's being documented correctly, that you're not going to have to pay taxes on those things. And even with the overtime, you are your employer is collecting taxes on that. So that could potentially mean a sizable refund, depending on the nature of your overall tax situation. Now, that also could mean that if your spouse was the one getting the overtime and you guys are getting through a divorce, that they may have been over withholding their taxes and that they are anticipating getting a sizable refund in the spring.
Karen Covy: 22:39
Yeah, that's true. Although a couple of things, my reading of the act was that it's not all of your tips through, you know, that are deductible. It's, I think what, up to $25,000 or something?
Leah Hadley: 22:53
That sounds right. Yeah.
Karen Covy: 22:53
So if you live on tips and you're, you know, you're working in a really good restaurant or what have you, and you're bringing home $50,000 in tips, also don't bank on the fact that all of them are deductible, is what I'm saying.
Leah Hadley:
Yeah, that's right. Absolutely.
Karen Covy:
So that is that's interesting. And what about what else? Those are two good things that are happening, but I also want to ask you about is that a forever thing?
Leah Hadley: 23:24
No, no, these are temporary. And you know, all a lot of it really is. And I will say, even the things that they say are permanent, Karen, they're permanent until they change them, right?
Karen Covy: 23:36
Right, right.
Leah Hadley: 23:37
So I think that that though really speaks to how important it is to understand how these things impact your finances. So when you are negotiating your settlement, you understand what does this actually mean to me in real terms, right? So if the child tax credit is higher, right, then I know I'm gonna be getting a higher amount for that child tax credit. And now, if it's growing every year, that's very different from what we experienced in the past, right? Um, and so we want to make sure that we understand those things. What does that actually mean to me in terms of my financial situation? Um, and understanding that things change. And so the language in your agreement should respect the fact that things change, right? Especially as early as to when you're talking about co-parenting and like, you know, the tax situation related to the kids and all of that, how that evolves over the years, making sure that you have some way of dealing with these changes because I don't know, they've changed quite a bit in the last 10 years. I don't anticipate anything different going forward.
Karen Covy: 24:39
Yeah. And I think the other thing is that that I hope people hear is that it's important whether you're going through a divorce or not, even if you were divorced years ago, that every year, at about this time of year, if not earlier, you're sitting down with somebody, a financial advisor, a tax professional, someone who can say, This is what's coming down the pike, so that you can plan. So if somebody is right now, as we're recording this, it's October of 2025. Um, if somebody's sitting there thinking, oh my gosh, what do I do? Is it too late for me to tax plan in 2025? Am I just cooked? What do you say to them?
Leah Hadley: 25:20
Yeah, this is the time where we're really focused. I mean, the next two months of the year essentially is where we are very, very focused on tax planning. What can we do before the end of the year? There are things that need to be done before the end of the year that have a December 31st deadline. There are other things that have, you know, later deadlines, but making sure that we understand where our clients are relative to those deadlines, what needs to happen and all of that, that is our primary focus in November and December. And I really encourage everybody to meet with their financial advisor in November or December. You may have opportunities for tax loss harvesting. You may want to, you know, do some charitable giving for part of your tax planning. There's so many things that we're looking at. We have a very long checklist that we work through with our clients because there's so much to consider at the end of the year.
Karen Covy: 26:06
100%. And for those people who are going through a divorce right now and maybe coming close to the end of it, I can't say uh strongly enough how important it is to check with a financial advisor now, even if you have already and you think, oh, I've got this. But because of all these tax law changes, whether you get divorced as of December 31st of 2025 or January 1st of 2026 can make a huge difference in your tax picture. Am I right?
Leah Hadley: 26:38
It absolutely can. And the one piece that I didn't mention, where it is a little bit late in the year for us to do anything about, but I see it very consistently, is inaccurate withholding uh from your paychecks, from people's paychecks, right? So when you complete your W4, most people are completing that W4, saying that they're going to be filing their taxes jointly. You know, people don't typically file their W4 every year. They do it, you know, maybe when they start their job and they may not think about it again. But the reality is if you haven't updated it and you are still withholding like you're going to be filing jointly, you probably have not been withholding enough taxes. Um, and so what we want to help people understand is if there's going to be a liability, first of all, is there anything we can do in the last couple of months to offset that? Um, but then additionally, so you have that information and you know how to plan for it.
Karen Covy: 27:28
Yeah. And just to sort of tie this back to where we started with health insurance and, you know, on the marketplace, your ability to qualify for certain subsidies or you know, depends on your income level, right? So could I can see, or maybe I'm thinking about this wrong, the fact that somebody is getting tip money and it re does that reduce their income? Could that change their health insurance options moving forward?
Leah Hadley: 27:59
This is a great question. And yeah, so it is. It's based on the modified adjusted gross income. And so anything that we can do to keep that lower for people, especially who are like right at that threshold to be eligible for subsidies, for example, um, is really important. And so you're exactly right, Karen. There is some planning that can be done there, and it has the potential to save you thousands of dollars in the coming year. So it's really important that you have a good handle on, you know, your own situation there.
Karen Covy: 28:27
100%, because it sounds like it can save you not only in tax planning, but also in health insurance premiums. I mean, this area is so complicated. There is so much to it. I it's like you, you're a finance advisor, I'm a lawyer. I would still go to you
Leah Hadley:
We have lots of lawyer clients. Absolutely. Yeah.
Karen Covy:
Yeah, because this isn't it changes so much and it's not my complete focus, whereas it is yours, it makes such a big difference for people. So, you know, we've talked about some of the things in the Big Beautiful Bill Act. What about keeping the house? Because I know that's the biggest thing people come to me with is like, okay, I want to keep the house. Um what's coming down the pike from a tax perspective that might affect somebody's ability to keep the house?
Leah Hadley: 29:20
So that's interesting because there's some different, depending on where you live and the specifics of like how the taxes are in your local area are gonna somewhat impact that answer, Karen. So it is gonna vary across the country. You know, there was a significant increase in um the deduction for the salt tax that's now available for people that can be really, really go ahead.
Karen Covy: 29:41
What's the salt tax?
Leah Hadley: 29:43
State and local tax. So how much you're able, like what if you're paying state and local, how much you're able to deduct um when you're when you're paying your federal taxes. So anyway, the um the ability to um deduct PMI um is is going to be helpful for people. Who are putting down, go ahead.
Karen Covy: 30:02
What's PMI?
Leah Hadley: 30:03
It's mortgage insurance. So if you're not able to put down that 20% down payment in order for the bank to protect themselves from the risk of, you know, you not having enough equity in the home, they do charge PMI, which is that mortgage insurance, in order to protect themselves. And that is going to be deductible.
Karen Covy: 30:20
Okay. So and just, you know, for those people who might not be familiar with this, if you're paying a mortgage, what's the difference between mortgage interest and PMI? Is it the same interest?
Leah Hadley: 30:33
Interest is, yeah, the interest is based on your actual mortgage, like what you borrowed from the bank, right? The PMI is based on the bank's risk assessment that's going to be related to the amount of equity that you have in the house. So they're really two completely separate things. And the PMI can come off once there is enough equity built up in the house. And so sometimes it's even helpful to call your lender and say, like, you know, I think the value of my home has gone up quite a bit. I think there's enough equity here. Can we do an appraisal or something in order to get that PMI knocked off? So that is a possibility for people, even if they haven't necessarily reduced their mortgage down enough because houses have gone up.
Karen Covy: 31:11
Yeah, I love that tip. That is a great tip. And the PMI, depending on the size of the mortgage and the size of the house, it can be significant and every little bit helps. But what about interest, the interest you're paying on the loan? Um, can you deduct that from your taxes? Yes. Okay. So, and this doesn't nothing is changed with that, at least. Um, I don't know the answer to that specifically. I'd have to look that up. Okay. So that changes, that's with respect to the house. But while we're on this, and you know, apart from the big beautiful bill, because housing is such a big part of divorce, how can people make that assessment of can I really afford to keep the house? Because the last thing you want is to keep something that you can't afford, and a year after the divorce, you gotta sell it anyway, or you're being foreclosed on because you couldn't make the payments, or, you know, the whole nine yards, right? So how does somebody go about making that determination of can I afford this?
Leah Hadley: 32:19
It this is one of the biggest things that we deal with in our practice, and it really has been extremely challenging. You know, I mentioned in my own divorce I was in a situation where, you know, the housing market had completely crashed. And, you know, it was the time when, you know, houses were being foreclosed on right and left. And, you know, to be able to hold onto a house during that time was fortunate. But that was its own set of problems, right? Now we're in a situation where house prices have gone up dramatically, right? And so that means a fair amount of equity, probably divided between the parties, which can have its own challenges associated with it. We're in a higher interest rate environment. So for a lot of people, Karen, they're still benefiting from these like three, three and a half percent interest on their mortgage where you just cannot refinance at that kind of rate right now. So if you have to get somebody else's name off the mortgage and you can't just assume that liability, you have to refinance it into your own name. You're looking at uh interest rates where they are now, right? Um, and so yes, we are seeing them start to come down a little bit, but we are nowhere near those amazing interest rates that we had historically. So if you think about it, think about the factors that are impacting that negotiation, right? You have the equity in the house that's been increasing. So let's just say there's $500,000 of equity in the house and you have to give your spouse $250,000 of that, right? Maybe there's already a $250,000 loan on the house. And so now you're refinancing for $500,000. So you can pay out your other person, and you're at maybe you were at 3%, maybe you're gonna be at 6% now. I mean, your mortgage payment could be substantially higher, even going out another 30 years than what you were paying before. So we have the cash flow of actually covering the mortgage and making sure everybody's getting what they're entitled to. There's that piece of it, right? But then there's also taking care of the home. And there's a lot of costs associated with taking care of the home. There's the utilities, there's the maintenance of the home. You know, if your partner was doing certain things, maybe, you know, I'm in Cleveland, so obviously snow is a big issue here. You know, if my partner is the one who is taking care of the um the driveway, and now all of a sudden I'm like, you know what, I don't have time to do the snow thrower. I gotta get somebody who's gonna plow my driveway before I have to go to work. Like, that's another cost that we have to plan for, right? So I really encourage people to look at least three scenarios. If they want to stay in their existing house, great. Let's be very clear on what the costs are gonna be. Let's understand what needs to happen. If there is a mortgage, what does that look like? How is that gonna change? But let's look at two other housing options at least. Maybe one is one where you're going to rent. What does that look like from a cash flow standpoint? Maybe another one is one that you're gonna buy somewhere else. What does that look like from a cash flow standpoint? You kind of see all of those in black and white. It's gonna be an extremely valuable exercise to recognize like, you know what? Yes, I like staying in the home. Maybe I don't necessarily want to move. But for an example of a mom that I was working with in Virginia, she was able to save $1,000 in cash flow each month by moving into something that they were renting. On top of that, she was able to take the equity from the house that got sold, invest it, and generate more income. So saving $1,000 a month plus generating additional income, this is a single mom with three kids. Like, this is a meaningful change in her financial circumstances, right? But going through that process of seeing like, what does this actually mean for me and my family? So many people tell me, Karen, I don't want to rent, I don't want to throw my money away. I hear that all the time. And what I always say to people is, you know, you're in this huge transition. You might not be in a position to be making sort of those permanent decisions right now. And to your point, Karen, if you stay in the house, you negotiate to stay in the house, and then you're the one selling it a year later, you're stuck with all the expenses associated with selling that house that probably were not factored into your negotiation to begin with. And that can be really frustrating. So really helping people to understand all the pros and cons and all the considerations is so valuable. But I think that black and white exercise of like, this is what we're actually talking about in real numbers, just is so helpful for people.
Karen Covy: 36:38
Yeah, I find that because people have this sort of vague idea of, well, I can do this, or you ask them, and a lot of people genuinely believe they know off the top of their head what their budget is. But then when you go back and actually look at numbers, they say, Oh, I guess it's a little bit different. And a little different here and a little different there can add up to a big difference, which is why, again, I think working with somebody like you is so helpful because you make people put the numbers on the page.
Leah Hadley: 37:12
That's right. That's right. And it is, it's so valuable. And the other piece of it is it takes the emotion out of it, right? That's a big part of what we're doing, is trying to say, okay, yes, I know you're exhausted. I know the thought of packing up your house and moving is like the last thing in the world you want to do right now. But what does this actually mean for your future? And unfortunately, you know, we've had so many situations where people have reached out after the fact, like after they've gone through divorce, we had this woman, God bless her, she just was dealing with some horrible flooding and mold in her basement. And she was in a situation, she wasn't gonna be able to sell that house. She couldn't keep up with the mortgage, she couldn't do anything about the water because she just didn't have the funds to deal with it and it wasn't an insurance claim. Um, and so she was just stuck in a rock and a hard place. And there wasn't, you know, I mean, in that case, you hope that like family or somebody's gonna come in and help. But like we could have prevented all of that by making sure she was in a situation that she could afford to deal with the things that might come up.
Karen Covy: 38:10
Yeah. I mean, so many people when they're making their post-divorce budget, um they they're not factoring in what happens if the roof leaks or the basement floods or the I mean, why would you think of that? But yet at the same time, you have to, right? And it's about risk assessment. You know, that you know if you don't have a little nest egg to, you know, in case of emergency fund, you could be between a rock and a hard place. So again, it's just it's a reason why people need to work with someone like you.
Leah Hadley: 38:48
Well, and the other piece of it is that I always tell people, because people think financial advisors, they connect that with investing, you know, the whole like stockbroker, you know, image and in people's minds. But I think what financial planners do more so than anything else, at least like fee-only planners like myself, is that's what we're looking at risk. Where is the risk in this agreement and how can we protect you from that risk? And having that set of eyes that is really trained and focused on the risk is so valuable.
Karen Covy: 39:18
Yeah, I couldn't agree more. Leah, this I could keep talking. I could I could geek out on this stuff for another hour, but I want to be respectful of your time. This has been so helpful. If people want to work with you, if they want to learn more, where's the best place for them to find you?
Leah Hadley: 39:33
I'm everywhere online. Please check out my podcast, Intentional Divorce Insights. Um, and you can connect with me directly on LinkedIn. I'm very active there under Leah A. Hadley.
Karen Covy: 39:44
Again, thank you so much, Leah. And for those of you who are out there watching and listening, I hope you have taken from this conversation the value of a financial advisor in your divorce and how I think everyone needs one, even if you think you don't. It makes sense to sit down and make sure all of your numbers are right. Um, and especially to make sure that you understand what the implications are coming down the road of at least this round of tax changes. No, who knows what the future will hold. But for this, at least you'll be set for the next year or two, maybe. And for those of you out there watching and listening, if you enjoyed today's episode, if you want to hear more episodes just like it, do me a big favor: give this episode a thumbs up, like, subscribe to the episode, subscribe to the podcast, and I look forward to talking with you again next time.
