When a marriage ends, there are many changes and challenges to grapple with—including financial 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

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.

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.