Though divorce rates in the United States are declining significantly in recent years, divorce is still a challenge many Americans face during their lives. Aside from the accompanying emotional turbulence, divorce can be a significant financial burden—regardless of who initiates the split. So knowing the cost of divorce, as well as the state of your finances, is very important.
The financial downside of divorce can be substantial. For starters, simply getting a divorce can cost a bundle if you hire a lawyer to represent you. But unfortunately, that’s often an unavoidable cost.
After the marriage is severed, you’re likely to run a separate home and be solely responsible for the mortgage or rent, insurance, utilities, and other expenses. There might be car payments, credit card debt, and other obligations to assume as well, particularly if you have children. You continue to be responsible for any joint debts.
These costs add up to increased financial burdens for you. You may have to adjust your goals to fit your new circumstances.
You might be tempted to economize by not turning to a professional whose fees seem high. But ultimately, good financial advisers, lawyers, and other professionals can save you money by informing you about approaches you might not have been aware of, or providing you with strategies for getting back on a solid financial track once the dust settles.
It’s smart to keep track of your finances throughout your marriage. However, if your relationship is coming to a close, it’s important to start putting together your own record of where you and your spouse stand financially. Make sure you have copies of:
It’s also smart to know what pension and Social Security benefits you’re entitled to, which may include a portion of your spouse’s benefits.
The more extensive your knowledge of your financial situation, the better your chances will be of minimizing the cost—both emotional and financial—of your split. And if you know both your own financial status and your spouse’s, you’re more likely to get what you feel you deserve in your divorce settlement.
State laws determine much of the process of sharing possessions and wealth upon divorce. Some states use the rule of equitable distribution. That means the amount you get in your divorce settlement depends on certain factors, such as your salary when you got married, the length of your marriage, your age and your spouse’s age, and the expenses you might have as a custodial parent. It’s quite common that the more affluent partner gets a larger share of the family assets.
If your home is in a community property state, then the law requires a fifty-fifty split of jointly owned property and of everything either of you earned during the marriage. However, there are often major disputes about what was earned, what is owned, and so on. So keeping records and copies of essential information can be just as valuable to you in a community property state.
Wherever you live, you can save money and headaches by trying to work out your divorce settlement outside of the courts, with a lawyer present to document and record whatever you and your ex decide.
Mediators and arbitrators can also help head off a trip to court. Mediators are facilitators who participate in your negotiations but cannot make decisions. Arbitrators also advise and facilitate, but they are often given the power to enforce a settlement, known as a binding decision, which they may outline themselves.