How much will divorce cost me?
The short answer is: Get out the check book.
Certainly not every divorce is going to be costly for the parties involved. In the case of a couple that has been married only a short time, and have no children, it is unlikely that a divorce will financially cost either of the parties much money, other than relatively low attorney fees, and/or the additional cost one pays to no longer share expenses with someone.
But for those couples who wait until several years, several assets, and several kids after the “I do’s” to say, “I won’t anymore”, the financial costs can be enormous.
Between dividing up marital assets, including 401Ks and home equity, child support, and alimony, a divorce can be an extremely costly break up.
Consider the situation of Steve, from Lincoln. Steve was a computer whiz growing up. In his teens he started his own software company, which paid for his computer science degree, and his MBA. While in college he was star-struck by the only person in his first semester calculus class who was smarter than him – a young lady named Lori, who became the love of his life. They married over winter break during their sophomore year, and Lori was pregnant soon after. Being as they had sufficient assets to pay for Steve’s education, and neither one of them needed to work, Lori quit college after her sophomore year.
The first of their 2 children was born while Steve was still in college. The next child came along 2 years later. The software business never became a huge company, but it did very well, allowing the happy couple to lead an upper middle class life, with Lori working as a stay at home mom.
The software business was a corporation, and Steve drew an annual salary of $112,000, plus dividends. They put money into IRA accounts, and college funds for the kids. Things went really well for about 9 years of marriage.
Now, the only thing Steve liked more than his software, was his hard liquor. Steve came from a family of alcoholics, and unfortunately, he too eventually fell victim to the problem. The marriage became rocky, and after one too many nights of Steve passing out in his car in the front yard, Lori had enough. She asked Steve to move out, and she went to a divorce lawyer.
Steve, who felt that the divorce was in no way his fault, also went to an attorney, and complained of Lori’s lack of structure, lack of boundaries, and lack of discipline for the children. “Those kids will grow up with no idea of hard work, any ability to follow through on anything, and no sense of responsibility if Lori gets custody.” Not understanding the logic and reason behind his lawyer’s thoughts that Lori might not be that terrible if Steve had been willing to leave her alone with the kids as a stay at home mom for the last 10 years, Steve pressed on. “It is in the children’s best interests that I receive custody, and I will not settle for anything less.”, Steve demanded.
The lawyer, sensing a very messy, very contested, and very time consuming custody battle ahead, quoted Steve an initial retainer of $10,000, payable at the rate of $225 per hour, which Steve gladly paid.
After a lengthy litigation process during which Steve turned down several reasonable offers to settle, and a 2 day custody trial, the judge awarded custody of the children to Lori. Steve, based on Nebraska’s child support calculation, was ordered to pay child support for 2 children in the amount of $1,700 per month for the 2 kids, and then $1,200 per month once there was 1 child left to support. Being as the oldest child was 10 years old at the time of the divorce, and support needs to be paid until a child reaches age 19 in Nebraska, Steve was going to pay $204,000 for the next 9 years until the first child turned 19. Then he had to pay $28,800 more over the next 2 years, until the second child turned 19. That was $232,800 in child support over the term.
Lori, who was only 34 at the time of the divorce, had no degree, no work experience, and no social security earnings built up. She received ½ of the retirement assets, but they could not be drawn upon without a 20% penalty. She had a good 30 years she could continue to work, and was going to need income. The court felt Steve had his turn to finish college, and make a living, so now it was Lori’s turn. The court ordered Steve to pay Lori alimony, in addition to child support. The alimony was so that Lori could support herself, while she went back to school, which of course had to be paid for, too. In addition to the child support, Steve was ordered to pay Lori $2,500 per month in alimony for 5 years, and then $1,500 per month for 5 more years. There was another $240,000 bill for Steve.
Steve, being very litigious, also wracked up a $35,000 fee with his attorney for the divorce. Additionally, he had to divide the IRA accounts with Lori on a 50/50 split.
So aside from the emotional toll, which was very heavy on everyone, Steve ended up paying $472,800 to Lori over the next 10 years, and $35,000 to his attorney, for this divorce. Over $500,000 for the divorce for Steve, (not counting ½ of the retirement accounts) who was just an average guy making $112,000 per year.