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.