5 simple and practical tips to help you reduce costs when going through a divorce
Making a decision to divorce your partner is already fraught with emotion - now add money to the mix! Even though over 40% of all marriages now end in a divorce, there are still so many myths and misconceptions about what the rules are and how you can dissolve your marriage with the least amount of financial stress. Even if you feel you and your partner are amicable, you should protect yourself and get an expert to weigh in if there are material assets or children involved.
Getting a divorce is a top money moment - it can be a wealth destroyer if not done properly. Protect yourself with these tips below and listen to our podcast on this topic here.
Tip #1 - Be organized with your finances
We recommend all couples do this even if they are NOT getting a divorce because it is good practice to know where you stand financially.
So take an inventory of all your finances closest to your date of marriage and that means both of you get a statement of all your assets & liabilities. Assets may include: Bank accounts, investment accounts like your RRSP, TFSAs or non-registered investment accounts. And liabilities are loans, mortgage, car loan or student loans. Print out the statement or keep a digital copy of it in a folder to file away. And if you are getting a divorce, you need to take inventory of all personal and joint financial accounts closest to the date of separation
Two important 2 dates for financial snapshot: Date of separation AND on Date of marriage - they both feed into a calculation as part of your settlement agreement. The importance of being organized and having the statements available from the date of marriage will save you a lot of time & stress. Banks are only required to keep copies of your statements for 7 years but on average, people file for divorce after 8 years of marriage!
Tip #2 - Find a lawyer that you are comfortable with
Get a consultation with at least 2-3 lawyers and interview them! Make sure you are comfortable with them and believe they will represent you well. Many lawyers offer a free consultation, so take advantage of it and have questions ready for them - give them a brief summary of your case and ask them if they have had experience with similar ones. Ask them about their fees, their communication style, their opinion on how long your case will go based on similar cases and what next steps would be.
Get them to walk you through as many things as possible during the consultation
Tip #3 - understand your lawyer’s fees so there are no surprises when you get the bill
Understand the costs of working with your lawyer. Some lawyers will ask for a retainer which is a lump sum upfront to cover the initial costs of working with them. Family lawyers may cost upwards of $400 / hour - find out exactly what that means, are you billed by the minute? Usually you get billed every time they talk to you, read and reply to emails to you or your spouse’s lawyer. In addition, there may be other costs, like the cost to mail or photocopy documents, you may be charge for those services too. Make sure you ask so you won’t be surprised with your bill
Tip #4 - Work efficiently with your lawyer and their legal team
Be prepared before you meet your lawyer or legal team and write down your questions in advance. Some people also work with the legal clerk who supports the lawyer and their role is to help prepare the communication and files. The hourly rate of the legal clerk is also much lower than the lawyer which makes it another way to manage costs. Take notes and do as much of the paperwork yourself or with the legal clerk’s help and save the important questions for the lawyer
Read the documents that are pulled together more than once. Typos and miscalculations may happen especially when you’re negotiating & revising the numbers. During our friend’s divorce, 1 of her typos was a decimal point in the wrong spot. She caught it, but it could have been a super expensive mistake!
However remember - YES it’s a life changing document. BUT don’t beat yourself up over mistakes, or things you missed as well, there’s no such thing as the perfect separation agreement and it’s not easy.
Tip #5 - Plan for your new life as a single person
Planning for the immediate future and updating important documents and services is critical - plus it can feel good. For example, get a separate bank account or credit card if you don’t have one already.
Make sure you update your emergency contacts, your will and your beneficiaries. If you have an insurance benefits plan at work, check with your HR rep on what you need to do to update your relationship status from married to “separated” or “divorced” and update your marital status with your tax agency CRA - Canada Revenue Agency in Canada or IRA in the US for tax purposes as well.
Consider a Prenup!
And if you aren’t married yet but thinking about it, consider getting a prenup. A prenuptial agreement is a legal document which outlines both you and your partner’s assets and liabilities before marriage and also what happens to property if and when the marriage ends. It costs between $500 to $2k to set up. It's not romantic but it's like car insurance. You wish you never have to use it but it's there if you need it. And it is still far cheaper than if you were to get a divorce.
A divorce is one of the top 3 most stressful life events (more stressful than going to jail!). Don’t be afraid to ask for help and reach out to the experts. To learn more you can listen to our podcast "Cost of Getting a Divorce" here.
Leave a comment below in case you have any questions.
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