7 Ways Divorce Can Cost You Big — and How to Avoid Them

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A divorce can be a serious financial setback. If you seek to end your marriage without considering how much it will cost, you may be in for an unpleasant surprise.

Ending a marriage is a bit like dissolving a business partnership. Assets must be divided, and you may end up with less than you expected. If you pay alimony or child support, your financial obligations to your former spouse could last for many years. You likely will need the services of an attorney, and they won’t come cheaply.

Fortunately there things you can do to protect yourself. What follows are seven examples of how a divorce can cost you big time and steps you can take to limit the financial damage.

1. Spending too much time with your attorney

Client meeting attorney.
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While it may be tempting to use your attorney as a shoulder to cry on, it’s not cost-effective. You’ll likely be billed for all the time you spend chatting about your problems, so stay focused and stick to the topics your attorney needs to discuss to represent you. Complaints about your in-laws aren’t relevant.

“Like most divorce lawyers, we bill hourly,” said New Hampshire attorney Andrew Winters. “We have a frank conversation with our clients at the time we are retained so that they know they are billed for all of our time in six-minute increments.”

One way to cut down on legal fees is to do some of the legwork yourself through an online site like RocketLawyer.

2. Forgetting to have your “ex” removed as your life insurance beneficiary

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If you divorce, it’s important to update your life insurance beneficiaries. If you remarry but keep your ex-spouse as your beneficiary, he or she will collect on your policy when you die, not your current partner.

Life insurance professionals suggest that you review your policy periodically so you can change your beneficiaries if necessary. Think of your life insurance policy as a living document that can be altered to reflect your present situation. If you simply buy a policy, toss it into a drawer and forget about it, you may end up giving your benefits to the wrong people. A similar problem can occur if you forget to update your will following a divorce.

For more detail on this topic, check out: “Should I Drop My Life Insurance Policy?

3. Refusing to negotiate

Angry businessman lashing out in a meeting.
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The more time you spend quarreling with your spouse over such things as the division of assets, the more you will pay in legal fees. In the end, you may wonder why the things you fought about were so important to you. To expedite the situation you should be prepared to give in to your spouse’s demands from time to time. Neither party is likely to be completely happy with a divorce settlement, said Elysa Greenblatt, a New York attorney.

“Odds are that you are not going to get everything you want in your divorce,” she said. “You should enter negotiations understanding that there will need to be compromise on both sides. If you won’t budge on any issues, negotiations will stall and that could require you to go to court to resolve your divorce.”

4. Dismissing the possibility of an amicable, do-it-yourself divorce

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You can avoid attorney fees if you and your spouse can agree on a divorce plan and avoid disputes over assets or child custody. It’s not always an easy thing to do, but the incentive is that you can save thousands of dollars. In a do-it-yourself divorce, the parties file their own legal documents, complete paperwork without the help of lawyers, and draft financial agreements.

If there are disputes over money, property or access to children, this probably isn’t a good choice. However, if you and your spouse are on good terms and there is mutual trust, a do-it-yourself divorce may be worth considering.

One option is through online sources like our partner RocketLawyer, where you can — at a fraction of the cost of a visit to a brick-and-mortar lawyer — access documents you need for a marriage separation, a divorce settlement and much more.

5. Taking your case to court

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Most divorces are settled out of court, and for good reason: Your attorney fees can skyrocket during a trial. You may not like negotiating a settlement with your spouse, but taking the case to the next level can be costly. It’s better to try to work things out.

Going to trial involves billable preparation time for your attorney, said New Jersey lawyer Ali Smedley. This may include a review of the case file, the identification of exhibits, and meetings with potential witnesses.

“Many people don’t take the preparation costs into consideration when making the decision to move forward with trial,” Smedley said.

6. Not having a prenuptial agreement

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If you have significant assets at the time of your marriage, it’s a good idea to ask your partner to sign a prenuptial agreement. While it’s not very romantic and it may indicate a lack of trust, such a contract can help protect you if the marriage doesn’t work out.

“Whenever there are significant assets, a prenuptial agreement is recommended so that in the event of divorce both parties know what they will receive,” said attorney Stuart P. Slotnick.

A “prenup” commonly includes provisions for spousal support and spells out how assets will be divided if the marriage ends. It can prevent someone from walking away with half of a wealthier spouse’s assets after a brief marriage. It’s also possible to use a prenup to limit liability for the debts your spouse incurred prior to your marriage. If you decide to draft a prenup, be sure to consult an attorney to make sure it will stand up in court.

7. Battling over a house

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No one likes to give up their home, and divorcing couples often clash over the question of who will get to remain in the residence they once shared. Before you follow this path, make sure that winning custody of the home truly is in your interest. Without the financial help of your ex, keeping up mortgage payments, paying property taxes, and funding routine maintenance projects may put a strain on your post-marital budget.

“People often hold onto unreasonable positions because they are being guided by emotion, as opposed to reason,” said New York matrimonial and family law attorney Kara M. Bellew. “This often happens with a residence. Someone will fight hard to hold on to their home when financially it does not make good sense.”

What’s your experience of going through or witnessing a divorce? Share with us in comments below or on our Facebook page.

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