The Cost of Divorce: A Financial Guide
consequences. The truth is, divorce is an expensive business. According to Forbes, the median cost of
divorce is $7,000, while the average is between $15,000 to $20,000. A divorce can easily cost more, however,
once you factor in things like property distribution and child custody agreements. Understanding the
**average cost of divorce** can help you prepare financially.
Costs Associated with Divorce
Legal representation is probably the first thing that comes to mind when divorce is mentioned, but the cost
of divorce extends beyond an attorney. These may include:
- Joint debts, like credit card debts and auto loans
- Expenses related to setting up a new household, like moving, deposits, down payments, utilities,
replacing household items, etc. - Property division
- Therapy for yourself or children
- Alimony (spousal support or maintenance)
- Child support
You may need to adjust your financial goals for the immediate, and even longer-term, future.
It’s tempting to manage the situation on your own, but consulting professionals like a lawyer, accountant or
financial planner, and others can help you make the best of the situation. These services will cost you more
upfront, but pay dividends over time. Considering the long-term implications of decisions made during a
divorce can greatly impact the overall cost of divorce.
It’s tempting to manage the situation on your own, but consulting professionals like a lawyer,
accountant or financial planner, and others can help you make the best of the situation.
Gathering Essential Financial Information
To track joint assets that need to be divvied up, you’ll need copies of:
- Tax returns, wills, and salary statements
- Savings, checking, and credit card statements
- Life, homeowner’s, disability, medical, and car insurance policies
- Balances for retirement plans and accounts, like 401(k)s, IRAs, and pensions
- Documents related to mortgages, home equity loans, and other real estate documents
- Employment benefit plans, including stock options, bonuses, insurance, etc.
- Appraisals and photos of valuables
You may also be entitled to a portion of a spouse’s pension and Social Security benefits. Understanding
what you’re entitled to will help you get a fair divorce settlement.
Dividing Assets: Understanding State Laws
The state you’re getting a divorce in dictates much of how your possessions and wealth are divvied up. If the
state uses equitable distribution, the courts
decide how assets are split up based on factors like the length of the marriage, the earning power of each
spouse, and financial contributions. Separate property is considered separate, unless the spouses chose to
share assets; in that case, the court attempts to distribute them in an equitable (fair) way. The split will
not necessarily be equal. In other words, equitable distribution aims for a fair, though not necessarily
equal, division.
Other states use community property, where earnings are considered jointly held and courts
attempt to split assets 50/50 among the spouses. This includes jointly-owned property, as well as anything
earned during a marriage. There are only nine community property states in the U.S.
Settling Out of Court: Considering the Cost of Divorce Mediation
One way to keep costs down is to try to settle out of court using mediation or arbitration. Considering the
cost of divorce mediation can be a smart financial move. With mediation, a neutral
third-party listens to both sides and helps negotiate a compromise. Understanding the cost of divorce
mediation compared to litigation can be eye-opening. If mediation fails, litigation is the next step, which
typically increases the overall cost of divorce. A mediator can facilitate negotiations but cannot make
decisions. Arbitration also uses a neutral third party to listen to both sides but then makes a legally
binding decision.
Although divorce is never pleasant, entering the process with an awareness of your financial situation,
including the potential cost of divorce and the average cost of divorce, can keep further complications at
bay.
Remember, the more complex your divorce, the more costly it will be.
