The joke goes like this. Find someone you don’t like, give him or her half your net worth. That way you save $10,000 in fees for a divorce lawyer. With the divorce rate at 50%, chances are that either you or someone you know is getting a divorce. In this article, a divorce lawyer and a financial planner explain twenty-one practical
ways to save money in a divorce.
- Be your own Private Investigator. Chances are, no one knows your personalbusiness – or that of your spouse – like you do. What are your assets? Has your spouse said anything to indicate that there might be money someplace other than in your joint accounts? Where is your spouse Thursday nights? Are there records left casually around the house, in Day Planners or notes on the desk or the office trash can? Are there old retirement plans housed with former employers? Chances are that you can at least develop the questions, if not find all the answers.
- Fill out the Court Financial Forms. Fear is the primary cause of unreasonableness on the part of both parties. Each foresees a future in which they must live in squalor while the ex lives in splendor. The court financial forms help you to organize necessary data for today, and begin to look forward to what your expenses will be in your new life. It in turn gives you an opportunity to evaluate whether current income can support two households at the lifestyle you enjoy now, or whether a re-prioritization is in order.
- Get a real estate agent to value your house. Real estate markets are volatile and fickle. Assuming a value for your home, beach house or investment property, or basing your assumptions on last year’s mortgage refinancing appraisal may not be an accurate picture of what your property would sell for today. Realtors do “comps,” or comparative valuations, as a part of their regular business. Or you can hire an appraiser who, for a fee, will give you a valuation of your home.
- Ask your accountant to value a business. If you or your spouse have a small or closely held business, it may well have a value beyond the computers, desks and vehicles. The goodwill of the business (name recognition) can have tremendous value, as can patents and other intellectual property. If your spouse has an ownership interest or partnership share in a larger entity, the value of that interest may well constitute a sizeable portion of the marital estate, even if the business is not currently profitable.
- Calculate Child Support. Every State has state-specific child support guidelines. These can generally be found on-line or in your public library. While a guideline is not the same as a law, it is generally the Court’s default position, from which deviation may be granted if circumstances warrant. Support schedules are based on total income of both parents, parenting schedules (number of nights the child/ren spend at each parent’s house), child care and medical expenses.
- Pro Se (Do it Yourself). Especially in California, this option is gaining popularity. In cases with few complications (no children, short marriage, few assets), do-it-yourself can save time and money. Talk to your county Bar Association as to whether there is a pro se division to help with the legal paperwork. Divorce is a legal matter, and you want to be sure that the court will accept your filing.
- Talk to your lawyer’s secretary. Staff bills at a different rate than attorneys, when they bill at all. For simple questions (Has something happened yet? Did the attorney get my Fax?) it is often quicker – and cheaper – to ask the secretary. Also, often your attorney will have to ask her to get the answers on paperwork issues!)
- Talk to your Therapist. Many people make the mistake of confusing the expertise of the experts they work with. Your lawyer is the best resource for legal issues. Your Financial Planner can help with economic issues. But for the emotional challenges presented by this life change, your therapist is the one with the tools to assist you. Divorce is very emotional, and we all come to it ill prepared. The rash decisions that come from the parties being so emotionally raw are the greatest undoing of a successful negotiated settlement. Getting some help in taming your emotional demons – and dealing with those of your spouse— will greatly enhance the likelihood of a successful settlement. Make sure that whoever’s clock is ticking is the person whose skills can be most advantageous to you at that point. Your result will likely be both better and more cost effective.
- Talk to a Financial Planner. If you were selling a business, would you come to the table without a financial professional to assist you in making the deal? For many people, divorce is the single biggest economic decision they will make, and yet they expect their lawyer to simply switch hats and become a financial expert, as needed. What’s the pension worth? How much income can I get from a lump sum deal? How much alimony will I need to stay afloat economically? What if he dies or is disabled during the support period? A planner will not only help you to understand the most advantageous means of dividing assets and creating cash flow, but will help you to empower yourself as you move into your new life. Many women have not handled the bill paying function in their households, and are not clear on their costs of living. Assets need to be invested post-divorce in order to create a financially secure financial future. How many women have an “inner bag lady,” and regardless of income or net worth, live in fear of poverty? Taking control of your financial well-being will help control this fear.
- Do your own copying. Disclosure of financial information is very paper-intensive, and everyone needs copies of everything. Your attorney must bill you for the time staff spends making copies of your paperwork. Set aside a couple of hours to spend at a copy center (these vary widely in price and hours), and make three copies of everything: one for your attorney, one for planner, and one for yourself (which you may eventually provide to your spouse or their counsel).
- Use alternative dispute resolution. Mediation is a means of taking control of your own divorce. If you and your spouse are able to work together, even indirectly, mediation can be a non-adversarial means of deciding the outcome of your divorce. Who knows your needs better than you do? Who is better able to determine a parenting schedule? Often the future is smoother (especially when kids are involved) if the divorce does not become a pitched battle. If working with your spouse through a facilitator is uncomfortable for you, another potential method is Collaborative Divorce, in which both parties and their specially trained attorneys work together (often with Financial Planners, parent coordinators and other experts) to create a settlement in which each party is represented, but the object of everyone at the table is to create a settlement in a non-adversarial climate.
- Educate Yourself. Initial Consultation. In your first meeting with your attorney or financial planner, you will learn a great deal about two important things: What you face as you move ahead in the divorce process, and who is this individual with whom you will be intimately involved over the course of the next several months to several years. Initial consultations should be very informative and worthwhile. To maximize the benefit of time spent with your professionals, it is also important to bring yourself up to speed on the process, and on finances. The court financial forms help you to better understand what it really costs you to live, month by month. Take a class. The newspaper has mortgage rate information. There are some very good books on the subject of divorce which will help you to become familiar with your lawyer’s vocabulary and with the process, so you feel like the important member of your team which, of course, you are.
- Understand the billable hour. The tendency to contact your attorney with every question as it arises is great, and easy to understand. The more organized you are when you speak or meet with your attorney, the less of his or her expensive time you will take in conversation and paper shuffling Also, being in touch by e-mail or Fax allows your attorney to efficiently work with you, addressing your question at a time when he can focus on your case, rather than shifting gears by spontaneously taking your call when he is focused on another project.
- Let your spouse pay the filing fee. As a matter of ego, there is a tendency to want to be the one who files for divorce. As a practical matter, there are costs involved in filing (lawyer’s time, court costs), which might be borne by your spouse more easily.
- Sell the house. This is a hard one. Often the house is one of a couple’s greatest assets, and greatest expenses. If, in the property split, you get the house, you have to keep up not only the mortgage, but also all the ancillary maintenance expenses. Likely you will have to refinance to get your spouse’s name off the mortgage, which involves fees. If you find a year later that the house is more than you can handle and decide to sell then, the cost of selling the house will likely approach 8%, between commissions and selling concessions. That 8% comes out of your pocket, as do any taxes on appreciation beyond $250,000. Also, you will not have amortized your refinancing, and it will set you back a couple thousand dollars. If you sell the house pre-divorce, you share the selling expenses, generate cash for a down payment on a new home, and can absorb up to $500,000 in gain tax free.
- Appraise the pension plans. Some retirement plans, like an IRA or 401-k, are a lump of money, easily valued and easily distributed. Your interest in your spouse’s pension may or may not be 50%. Some retirement plans have vesting schedules, or defined benefits (at age 65 you will receive $5000 per month for life). The value of the pension, and of your interest in the pension, need to be determined so you can understand how much money you have going forward. The values are often surprising.
- Get a good lawyer. Often, clients who are confused about how to choose a lawyer will make a decision based on hourly rate. An expensive lawyer may end up as a more cost effective choice if he helps you get a better settlement or uses fewer hours. The inexpensive attorney’s rates may just be reflective of her costs (suburban vs. downtown?). Your friend’s “killer” lawyer may not be a comfortable fit for you and your situation. Be certain that your attorney works in Family Law. If you have special issues (foreign spouse, disability), see that he or she has some expertise in this area, as well. Friends, your local Bar Association, other professionals (your accountant, attorney, therapist or Financial Planner) may be able to provide you with some names.
If the grounds for your divorce includes infidelity, you may be able to get your terms met if you have verifiable proof of the affair. Visit Are You Cheating to learn more about how you can get proof of a cheating spouse.
- Check your bills. Has there been some aggressive spending post-separation? Is your spouse generating expenses, which should not be your responsibility? Does Fifi really need a grooming every month? Your bills are very telling about your – and your spouse’s – expenses and lifestyle. They will help you understand what you might need to cut back on if separation and divorce do not leave you with enough income to cover every expense. They will also show you your spouse’s expenditures, some of which might be difficult to justify as reasonable expenses going forward. Bills are a good reality check.
- Try to work it out with your spouse. The more you can settle between yourselves without third parties, the easier, cheaper and more amicable it will be. If you have kids, your spouse is likely going to be in your life for the long haul. Your children’s special occasions and milestones will be times to encounter each other, or possibly even work together (who’s paying for the wedding?). Making your own choices about your future, using your professionals for guidance as to how best to execute your decisions, will allow you peace of mind as well as peace in the family, that your interests are being served.
- Do not fight over the children. Children are often hardest hit by divorce. They need to know that even if Mom and Dad no longer love each other, they both love the kids. Likely you and your spouse can find creative, realistic parenting schedules that will allow you to co-parent to the children’s best advantage. Parenting coordinators can help you come up with schedules if you cannot, with the help of your mediator or attorneys, determine a workable schedule.
- Do not fight over personal property. Do you really need the lawyers discussing sofas and spatulas? It is much more cost effective to make a list, determine what each of you really wants, and negotiate the items of common interest. If the division seems disproportionate, either shrug it off or find a means of equalizing through cash or other assets. Photos? Copy them. Often people find that it’s not the items, but the letting go that poses the greatest challenges.
Remember that divorce is the beginning of a new life. Legally it is an event, but in actuality it is a process. Becoming knowledgeable and staying strong will enable you to play a key role in shaping your future.