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?
Emmett Walker says
Now a days the process of divorce has become expensive.Meditation could help us to save to save expense.
Thomas D. Ferreira says
I also wanted to comment that I agree with the article, and that mediation is vastly superior to the traditional way of battling it out. I am in a blended family, and my wife did it the litigation way, while my ex- and I mediated. I have a high-coo peration co-parenting relationship with my ex, whereas my wife has had nothing but trouble with hers.
Thomas D. Ferreira says
Leigh, I wanted to reply to your comment that there is no common law divorce. Although you’re technically right, co-habiting partners may obtain rights of spousal support and property division that are similar to California marriage, in what is known as a “Marvin action.” (Marvin v. Marvin, 18 Cal.3d at 681). Marvin actions rely on expressed and implied contract (a court can imply a contract from the parties’ conduct).
Neal@Wealth Pilgrim says
Sam….yes…I like your first piece of advice.
Well said. I’ll remember that one…believe me.
Money Obedience: You’re so right. At a time when you need to work most as a couple to ensure you don’t lose all your assets to the lawyers, you’re probably least likely to come to compromises. Angry spouses will run their own finances into the ground rather than come to a fair agreement with an ex. Thankfully my ex and I had one last burst of benevolence, allowing each other to walk away with the least damage — at least financially.
Samurai: There is no common law marriage in California. Two people can live together for any length of time and there is no legal or financial commitment to one another by law.
Financial Samurai says
I thought you were gonna say “the easiest way to save money from a divorce is to keep your junk in your pants”!!
This is a good one!
You know about the laws of cohabitation and stuff in California even if you are not married, and the default prenup rules after certain amount of years etc?
I’m going through a divorce at the moment and I can only say how thankful I am that we simply sat down, divided things up, and called it good. The rest has been court paperwork and filing fees. No lawyers.
The process was painful enough without arguing over every last thing. And the $710 in filing fees (Calif) was more than I wanted to pay, but was thankful that it wasn’t a bigger blow to my finances.
It helped that we had kept so much separate – checking accounts and investments. Neither of us “went after” the others’ assets. We each took responsibility for our own liabilities.
Thankfully it was all decided over the course of a weekend, as we were unable to continue speaking civilly to one another. But when both are motivated to move on rather than make a money grab, it can be relatively fast.
If you focus on being fair instead of punishing the other person, everything goes more smoothly. And yes, I have decided never to bind myself legally or financially to another again. Break ups are bad enough, but being forced by the courts to wait months and months and pay fees for dissolution slows the healing process and prevents life from moving forward. I’ll never trip down the aisle again.