Understanding the Financial Impact of Divorce
Written by Caroline Cakebread
Wednesday, November 7th, 2018
It's not something people normally think about when they walk down the aisle, but the reality is that not all marriages are built to last.
Going through a divorce is an emotionally painful process, but it can also have a significant impact on your finances. It's not just about the legal costs – there are a host of other expenses and new financial challenges that emerge during divorce that are important to understand and – if possible – plan for.
The Legal Costs of Divorce
The most recent Canadian Lawyer Legal Fees Survey puts the cost of an uncontested divorce at between $1,400 and $1,600 – in cases like this, you and your spouse agree on the divorce and its terms. But those costs spike considerably in cases where there's disagreement on terms – a contested divorce can cost up to $23,000 depending on whether you go to court and how long you spend there.
The steep difference between the cost of an uncontested and a contested divorce is evidence that working it out together before you head to the lawyer pays off. If possible, you and your spouse should work collaboratively early on to determine the basic terms of your divorce, including division of assets and custody of kids and support.
And if possible, communicate together instead of through a lawyer – if you rely on your lawyer to do so, you'll pay an hourly fee for calls. Consider that the most experienced family law professionals can charge as much as $382 per hour according to the same Canadian Lawyer survey.
Other legal costs you might face include separation agreements ($1,500-$2,000), custody and support agreements ($1,500 - $2,000) and the cost of an agreement dividing property and other assets ($1,300-$1,800).
Non-Legal Costs of Divorce
Separation usually comes with a new household and an entirely new set of bills to cover – rent, food, utilities, etc. Family mediator, Stephen Rosenfield, has estimated that separation can increase a couple's expenses by $20,000 to $30,000 per year due to support for a second household. That includes the loss of shared expenses around things like car insurance and the fact that your kids will likely require two sets of certain items such as furniture.
The Big Picture Impact
A divorce also changes your entire financial life. As a single person saving for retirement, you likely have to save more. If you've been a stay-at-home caregiver, you might also need to consider going back to work part-time or full-time. Divorce can also bring big financial decisions, like whether to sell the family home or whether to sell other joint assets.
Getting professional advice is critical for making sure you're ready to handle the financial challenges that come with divorce – and making sure you have a plan in place can help to reduce the stress.