Perhaps you’ve heard: Getting divorced is expensive. Whether you’re going to pay alimony or receive it, many partners ending a marriage will soon feel as if they’ve taken a financial beating. Even if the breakup is amicable, splitting assets isn’t pretty.
So if you’re looking to not inflate the cost of your divorce, try to do the following.
Involve the divorce lawyers as little as possible. Even some attorneys will tell you not to overdo it. “When I worked for a large firm, a divorce client racked up hundreds and thousands in bills by calling every day and having me speak to her parakeet over the phone,” says Elura Nanos, an attorney who occasionally does divorce work and co-owns Lawyer Up, a New York City-based educational company for law students.
Nanos says her client believed her ex was paying the legal bills and was trying to stick it to him. “I left the firm before their years-long litigation ended,” Nanos says. “Ultimately, she bore the bulk of her own legal bills — birdie time included.”
Shop around for your attorneys and don’t blindly rely on a friend’s recommendation, says Sacha Patires, an event planner and designer from Oklahoma City, who cites doing just that and not comparison shopping for divorce lawyers as her biggest mistakes. She estimates that from June 2009 to November 2010, she spent $70,000 in fees with several legal professionals.
“Contact your lawyer as least as possible,” Patires says. “Write down questions and when you have to call them, do so, and make it quick, efficient and stay on point.”
Don’t be an emotional spender. If you have kids, you naturally feel terrible that the family is splitting up. You may feel obligated to make it up to them in some way. Maybe you’ll buy them new toys. Some video games. Perhaps a pony.
Try not to go overboard. “My children’s lives were changing no matter what. I needed to accept that and work on new ways to help them adjust. Spending and buying them new things was not the answer,” says Cheryl Holland, who runs A’Sista Media Group LLC, a women’s empowerment coaching business in Rochester, New York.
Holland didn’t buy her kids a pony, but she admits, “I continued to spend money and credit as if we still had a two-income household.”
She recalls buying her sons the latest PlayStation units and games, expensive sneakers and clothing. “I bought my oldest son a $50 T-shirt. He wore it once, got a stain on it and never wore it again,” Holland says.
“I didn’t want my children to feel like they were missing out on what they were used to,” she explains. “In the end, that didn’t help the situation. I ended up having to sell my home and pay off debt for several years after the divorce.”
Split the assets as fairly as possible. This is obvious. This is also what gets divorcing couples into so much trouble. Some splitting spouses don’t want to divide everything equitably or have a differing view on what is fair.
Judy Crockett is divorced after a 20-year marriage, and she regrets that she agreed to take 40 percent of the retirement assets instead of 50 percent.
“Because he was older than me, and because I thought his health was not all that great, I agreed,” says Crockett, who is a retail management consultant in Manistee, Michigan.
But later she had regrets: “Wrong move,” Crockett says. “I earned my half, and I should have taken my half.”
Holland would take another do-over, if she could. She agreed to pay off her credit card, and her husband would pay off his. That sounded fair at the time, but she had far more to pay than her husband — and her debt was generally from shared household expenses.
“I would’ve been able to start my new life off with at least somewhat of a clean debt slate if I’d done things differently,” Holland says.
Consider selling the house now. If you get the house, you may feel like you’ve won the divorce lottery. But not so fast.
“One of the biggest financial mistakes people make is keeping the house,” says Renee Senes, a certified divorce financial analyst in Harvard, Massachusetts, who herself got divorced at age 50.
“Most people have no idea how much it costs to keep a home running, the hidden costs of upkeep and the maintenance their spouse did that they will not be able to do themselves,” she says. “Several years into a divorce, they then find themselves shouldering the burden of getting the house ready for sale, paying closing costs and perhaps paying capital gains that could have been avoided if the house had been sold as a joint asset while still married.”
Of course, everyone’s situation is different — you may love your house, want it and not care about future expenses.
Don’t forget about taxes. Who thinks about taxes during a divorce? Financial advisors tend to.
Michael Martin, one of the partners at Legacy Financial Partners LLC, a financial and tax planning firm in West Palm Beach, Florida, says a common error is neglecting to evaluate the true value of retirement assets like pension plans and individual retirement accounts.
Martin offers an example of a husband having a pension worth half a million and an IRA worth half a million. “Many people might just assume — Well, [the] husband takes the pension, and [the] wife takes the IRA,” Martin says.
Sometimes, that works out fine. However, a cautionary tale: Once he had a female client who’d planned on doing just that, but she didn’t realize the pension wasn’t subject to state income taxes while the IRA distributions were.
“It doesn’t seem like much at first blush,” Martin concedes, but in this case, he says the female client would have paid $20,000 in state taxes while her soon-to-be ex wasn’t going to have to pay a cent.
Senes echoes similar advice. “Retirement assets will be taxable upon withdrawal and therefore are worth at least a 15 percent less than non-retirement assets,” she says. “This is particularly important when older couples divorce and one party may be relying on a distribution of retirement assets to supplement living expenses.”
Recognize that there will never be a completely fair split. As noted earlier, you want to aim for fairness — but trying to achieve a perfect split is a fool’s errand.
In other words, if your ex is trying to get custody of the iTunes account you spent hundreds on, don’t spend thousands trying to wrestle it back. Sure, maybe your ex is getting something terrific that you wanted, but odds are, you’re walking away with something your ex had hoped for, too. If you’re both a little unhappy, that may mean you’ve negotiated well.
“I’ve seen parties to a divorce make the same mistake over and over — and that mistake is fixating on what they are entitled to,” Nanos says. “People get all wound up when they get advice from friends, colleagues, lawyers and even soap operas.”
Heeding all that advice and fighting stupid fights is a good way to turn your life into a soap opera — which is how so many divorced people find themselves returning to their attorneys. But it can’t be said enough: If you want to keep your divorce-related costs lower, use your lawyer as judiciously as possible.
“The only reason they are listening to you complain and cry about your ex is because they are making money while you are doing it. Every minute you sit in their office is costing you money,” Crockett advises. “Go cry on the shoulder of a stranger in the bar, and save your money for retirement.”
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How You’re Making Your Divorce More Expensive originally appeared on usnews.com
