Part 1 – The Cost of Divorce
One of the first things you will wonder about when contemplating a divorce is “How much will a divorce cost me?” A CBS Boston report stated that matrimonial law is a $28 billion a year industry with the average divorce costing about $20k. If you are considering a divorce, there are a few short and long term costs you should think about before officially getting rid of that insufferable spouse. Long term costs will involve financial issues post-divorce. Your short term costs will involve professionals you may hire during the divorce process, mediators, lawyers, financial planners etc. Let’s take a closer look at some of those short and long term costs; there are likely a few things you have not considered when it comes to the cost of divorce.
- Mediation. – According to Kimberly A. Hulett, J.D. founder of Mediation Matters, a Colorado mediation firm, fees for mediation are charged on an hourly basis, generally $120 per couple per hour or $60 per person per hour. Unlike attorneys, mediation requires no retainer fees. Mediation sessions are scheduled for a minimum of two hours. If the mediation continues past the allotted time, additional time will be charged in 30 minute increments. Depending on the complexity of the issues, most cases settle within three sessions. Ideally, mediation allows parties to search for options, isolate issues, and possibly resolve any conflicts and reach an agreement. Once an agreement is reached, the mediator will prepare a Memorandum of Understanding (MOU) covering the terms of the agreement. Mrs. Hulett mentions on her company’s website that “If mediation does not produce a signed MOU; the discussions in mediation are generally not allowed in court. This promotes open and honest discussions during the mediation without fear of retribution in Court.”
- The Attorney. – When a divorce is contentious, most people hire an attorney. The use of an attorney helps to ensure that your marital assets, any alimony or child support and other touchy areas will be handled equitably and justly. When looking at the cost of divorce, realize that most lawyers charge a hourly rate and require an up-front retainer. According to lawfirms.com, depending on the attorney / firm you use the hourly rate for a divorce attorney can range from $250 to $450 per hour of work. A World Law Direct report states that the up-font retainer is typically one-half of the estimated total cost. It is not unusual for the retainer to be $2000 to $5000 or more. The amount of time a divorce attorney will spend on your case is determined by whether your divorce is adversarial or collaborative. The more you and your spouse can agree on things the less time the attorney will be needed. This can greatly control the cost of divorce.
Once the divorce is final and the court fees and attorney costs have been paid, there may still remain other financial challenges that you never considered. These long term costs should be taken into account when deciding if you can afford to get divorced.
The Cost of Divorce, Long Term Costs:
- Loss of Income “If you and your spouse work, it can be hard after a divorce to continue living the same lifestyle as before with half the income. Especially when the expenses are not cut in half. Particularly when it comes to the marital home.
- The House “ If you did not sell the marital house prior to the divorce and one of you retained ownership, you could be in for a surprise when the time comes to sell. The spouse who retained the house, if required to pay capital gains from the sale of the house, will pay as an individual with only a $250,000 exclusion and miss out on the combined exclusion of $500,000 allowed as a couple.
- Retirement Savings Accounts “It is important to consider the tax-effecting of assets if you are demanding the retirement accounts. It is possible, depending on your tax bracket that you will have to pay 15% to 39% tax on that money when it is distributed at age 59½.
The true cost of divorce is more than the sum of court costs and attorney fees, there can be huge financial burdens after the divorce is stamped final and filled away. It is important to separate the finances from your emotions. Consider your divorce a business deal, leave your emotions in the other room and make sure you get the best deal for you possible. You have the ability to control the cost of divorce.