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How to have a financially responsible divorce.

Over the last ten years, both marriage and divorce rates in the U.S. have declined significantly. Yet if you’re facing the prospect of divorce, those statistics may bring cold comfort. Many fear the financial implications of a divorce, and for good reason: the average cost of a divorce is between $15,000 and $20,000, and can go up significantly from there if things are contentious.

While we all know stories of couples who have endured costly and time-consuming divorces, it’s very possible to divorce amicably and affordably. Below, we offer some tips on how to potentially minimize the financial burden of a divorce.

First, get yourself organized.

The more organized you are regarding your finances, the less stressful a divorce will be. The better you understand your overall financial picture, both as a married couple and as an individual, the easier it will be to create a path and plan to move forward.

Take some time to get all of your paperwork organized. Include these:

  • Financial records like bank account statements, retirement accounts, lists of assets and asset values, and life insurance policies
  • Tax returns and related receipts
  • Records of all household and marital expenses versus personal expenses
  • Any legal documentation including pre-nuptial agreements, living trusts, wills, and all of your retirement and other financial accounts
  • If you do not have your own checking account, get one

Next, start talking to experts.

While you may be going through this for the first time, you can turn to professionals who have helped people like you through the divorce process dozens of times. Often there are simple solutions to problems that may feel insurmountable to you.

Make time to speak with:

  • Friends and loved ones: Who have divorced in ways that you’d like to emulate.
  • A financial planner: If you do not have one, there is no better time to hire one than during a divorce. If you and your spouse share one, or if your spouse handled that aspect of your financial affairs, consider getting your own.
  • An accountant: You will begin filing your tax returns independently, and you will want an understanding of the tax implications of the divorce on your future filings — for example, who will claim the children as dependents. If you file your own taxes, take some time to research what your options are for filing post-divorce.
  • A divorce attorney: Even if you aren’t planning to hire your own attorney for representation, you may want to consult with one on the laws in your state, the different legal options you can take and more. We discuss those options in a bit more detail below.
  • Your HR representative at work: If your employer has an HR department, engage them to learn more about how your health insurance coverage and costs may change. You may also want to speak to them about retirement plans offered through work, or financial representatives of those plans. If you have not been saving for retirement, you will want to start.

Modify your household budget or start a new one.

In almost all circumstances, maintaining two homes will be more expensive than maintaining one. If you haven’t been managing your household’s budget, or if your household doesn’t have one, this is the perfect time to start. You will have to determine your existing household budget for divorce purposes, but more importantly, you’ll want to have a deep understanding of how much money you will need to spend on housing, utilities and essentials each month. Divorce can be a stressful time financially, so it is a wise time to save versus spend.

Settle as much as you can at the kitchen table.

There are so many more cultural references to nasty divorces than there are to nice ones, but we want you to know that amicable divorces are not only possible, they are becoming more common. You can save both heartache and significant legal fees by sorting out what you can between the two of you. For things you can’t solve at the kitchen table, there are a variety of legal approaches that may work for you without breaking the bank.

  • Uncontested Divorce: Though laws vary from state to state, many states offer couples an option where the parties can agree on all issues including the division of property and debt, the child custody arrangement, child support and spousal maintenance (if appropriate) prior to the case being filed. If you and your spouse are able to come to agreements on all of these items without the assistance of attorneys, your divorce can cost as little as a few hundred dollars and take days or weeks versus months or years.
  • Mediation: In mediation, the two parties bring in a neutral third party as a “mediator,” typically a consulting attorney. The mediator’s role is to help both parties find compromises and offer advice in drafting a settlement agreement. The advantages of mediation are many: Instead of both parties having independent legal advice and therefore fees, the parties can split the legal fees of one party. This process is often also faster than other options, taking as little as a few months or even weeks. The process works best with couples who agree on most matters and only need help solving a few key items.
  • Collaborative divorce: in a collaborative divorce, both parties hire their own attorneys to represent them with the intention of disputing all resolutions without having to go to court. Settling a divorce outside of court is advantageous for many reasons: conflict is less likely, legal fees should be much lower, and you avoid the stress of a trial. However, collaborative divorces are only ideal when both parties are committed to the process of working with each other — with the protection of having their own attorneys, who are present for all conversations. If either party decides to stop collaborating, the effort is dissolved and the parties go to litigation, or court, which is the most expensive divorce path.

Remember that this, too, shall pass.

Divorce is never an easy process, but with the right planning and support, it’s possible to move through the transition with less disruption, both financially and otherwise. Remember to rely on friends and experts to help you get to a better place, both financially and more broadly, and know that there are brighter days ahead.

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