Even if you and your soon-to-be-former spouse want an amicable split, divorce can be an expensive proposition. The secret of having a low cost divorce is understanding your terms and using mediation wisely.
2 Terms You Must Understand
There are two types of divorce – summary and regular. If you don’t have children, debt or real estate and can agree on everything, you’ll go the summary route. This way, you won’t have to go to trial. Summary is fast and cheap.
To start the ball rolling, you fill out a few forms and take them down to the courthouse. It costs a few hundred dollars to file for divorce, and if you have a summary dissolution and do it yourself, that will be the extent of your costs. You can also use a service like Legal Zoom to walk you through the process without spending too much. But many states have judicial websites where you can download all the forms and find instructions on how to complete them saving even more money.
Regular divorce, or dissolution, is for couples who aren’t able to agree on everything. These folks usually have a hearing. That doesn’t mean you have to litigate the divorce. Litigation is the worst alternative. It is costly. It can tear your family apart. You may never be able to recover financially from the process. That includes all your assets including your retirement. And worst of all…lawyers love it. Friends don’t let friends litigate divorce.
Understand that as soon as you hire a divorce lawyer, he or she benefits by making this an adversarial process. Every little issue will become a huge problem if you let your attorney have his/her way. Even your Social Security income can be impacted by a divorce. Of course there are probably many exceptions to this rule. In fact, some of my best friends are attorneys.
But remember, they usually bill by the hour and they just love to let those billable hours add up.
The alternative is mediation. This is just a fancy term for talking civilly with your soon-to-be-ex-spouse. You talk about what you think is fair. You listen to what your spouse thinks. And you compromise.
When you finally come to terms, you write up “Memorandums of Understanding.” These are filed with the court and set out the terms of the divorce.
What are the benefits of mediation?
The average cost of mediation is under $5,000. The average cost of a litigated divorce is between $25,000 and $50,000 – and that’s if you don’t fight too much. There are long lists of wealthy people who have divorced and paid millions.
A very wealthy friend of mine – worth over $15 million – shelled out over $1 million dollars in legal fees for his divorce. That could ruin anyone’s weekend! And the only dispute was over an asset worth about $250,000. Can you see the logic of spending $1 million to gain half of $250,000? I can’t. You can’t. But lawyers do.
You can mediate a divorce in less than six months. A litigated case could take a year and a half…or more.
3. More Money to Go Around
Because you save money, everyone makes out – except the lawyers.
In a litigated case, the judge can decide anything she wants. You have no control over it. But if you and your spouse come to an agreement, the judge doesn’t get to make arbitrary decisions that affect your life.
Litigation means all your records become public records. Every little detail. Your money. Your life. Everything. With mediation, you maintain privacy.
In short, mediation can save you both a fortune and possibly be the one thing that keeps you out of bankruptcy and foreclosure. So, now you’re convinced that mediation is the way to go.
But what do you do if your spouse is hard headed? He doesn’t want to compromise and is digging in? While I’ve never been in this situation, I think there is only one answer. You have to compromise. In fact, you have to compromise to the point of being overly generous to your soon-to-be-ex-spouse. This isn’t about what’s fair. Remember, this is about damage control.
Think of the example I gave with my friend. Would you spend $1 million to fight over something that is worth $250,000? Of course not.
My suggestion is to first explain the benefits of avoiding conflict. Then ask your spouse to make a proposal on how to split the assets. Tell him to make an offer than you can either accept or force him to accept. At the same time, tell him you’re willing to do that instead of him if he prefers. If you think about it, it forces him (and you) to be fair.
Do you think this approach would work? If you’ve gone through a divorce, were you able to do so without paying a fortune to an attorney? How?