Whether you’re in the wrong, in the right, or things just aren’t going as you’d hoped, divorce can be one of life’s most emotionally challenging experiences.
Divorce can also come with a slew of financial costs that many aren’t fully prepared for. Legal fees are just the tip of the iceberg, and a divorce can really rock the boat when it comes to your housing, transportation, credit, savings, and investments.
For couples who share vehicles, mortgages, or investments, separating finances can be complicated and costly. Below, I’ll go over some of the expected and not-so-expected costs of divorce to help you prepare and plan if you and your spouse decide it’s time to part ways.
No two divorces are the same
While the act of signing divorce papers is relatively simple, the ensuing process can be complex and affect nearly every aspect of your financial life, from income and savings to credit scores and day-to-day expenses.
In some cases, such as divorces where both parties signed a prenuptial agreement, divorces can be simpler. A “prenup” is a legal document signed by both parties prior to marriage that outlines how assets should be divided in the event of divorce. Even with a prenup, though, divorces that involve children can still get messy, as prenups typically only cover asset and wealth division.
Divorce costs are rarely ever fixed. Even in a “perfect” divorce where both parties are amicable and aren’t fighting, there will still be legal and court fees for both parties to pay, as Canadian law states that only a court can pass a civil divorce.
A straightforward, uncontested divorce may only cost a few thousand dollars, while a contested case involving lawyers, court hearings, and disputes over custody or property can easily escalate into tens of thousands.
Legal costs: lawyers, mediation, and court fees
Court fees are usually the cheapest part of the divorce, and most courts charge less than $300 for the basic divorce filing paperwork.
The largest cost factor when it comes to divorce is whether or not the divorce is contested. An uncontested divorce is one that is settled amicably, with both parties agreeing to basic terms. A contested divorce, on the other hand, is one where the terms are contested, which usually involves both parties paying their respective lawyers to fight for their case in front of a judge.
Hourly rates for family lawyers can start at $85 to $100 on the low end and can climb to $500 or more on the higher end. Lawyers don’t just charge while they’re in court, either. They can charge for phone calls, consultations, and filing paperwork.
An uncontested divorce, where both parties agree on all terms, typically costs between $1,500 and $3,000. This includes legal fees of $999 to $2,400 and a basic court fee of $669.
A contested divorce, which involves disputes over issues like child custody or finances, usually ranges from $15,000 to $35,000, with the same court fees. For particularly complex contested cases that require expert witnesses or lengthy litigation, total costs can exceed $100,000.
Financial fallout from divorce
Even when legal costs are kept to a minimum, the long-term financial ripple effects can be substantial.
Most provinces practise equal division of marital property, meaning assets like the family home, joint bank accounts, pensions, and RRSPs are typically split evenly. Even if only one partner contributed to certain assets during the marriage, both spouses may have a legal claim to a portion (unless a prenup was signed to clearly define asset division). This can feel like a financial setback, particularly for the higher-earning spouse or a sole contributor.
Joint debts also don’t disappear with a divorce. If both names are on a mortgage, loan, or credit card, both individuals remain legally responsible for making payments, even if only one person used the account.
Missed payments or disputes can damage both parties’ credit scores, making it harder to qualify for future loans or housing.
Investments may need to be liquidated or divided, and retirement timelines might have to be postponed due to reduced household income or split savings. Spousal RRSP contributions may also end, which would result in both parties having to reevaluate their retirement plans.
Long-term costs of divorce
Divorce often brings ongoing and less visible expenses that can affect your financial stability for years to come. These costs are easy to overlook, but they can add up quickly.
Shared custody of children often leads to increased childcare and transportation costs, especially if parents live in separate neighbourhoods or cities. There may also be new expenses like after-school programs, separate clothing or supplies for each household, and split travel costs for holidays.
If the court rules that it’s necessary, child support payments can be another large drain on your savings.
Separation as a ‘middle ground’
For some couples, separation can offer a middle ground between staying married and getting divorced. A separation allows spouses to live apart and settle key matters like finances, custody, and support, while remaining legally married. This separation can be informal, but many couples choose to formalize it through a separation agreement.
This can help couples maintain certain financial benefits, such as spousal health coverage or tax advantages, that would be lost in a divorce. It can also give couples time and space to work through their separation without the immediate emotional and financial strain of ending the marriage outright.
A choice that shouldn’t be made lightly
For some couples and some situations, divorce may be the only option. Ultimately, though, it’s not a decision that should be made lightly. To ensure a smooth process, it’s best for both parties to try to resolve things amicably in an uncontested divorce. The more messy and disagreeable the divorce is, the more both parties will pay in court and legal fees.
