Individuals in a long-term monogamous pair bond might compensate some aspects of mate choice by extra-pair (EP) mating. However, divorce is their only option to obtain a social mate that is more compatible or of higher quality. To understand the drivers and consequences of divorce, an analysis should integrate ecological and demographic factors intrinsic to the social and genetic mating system of any species. Here we study divorce in Malurus coronatus, a cooperatively breeding, year-round territorial fairy-wren with long-term pair bonds and low levels of EP paternity. Based on 8 years of data, divorce occurred 4 times more often in incestuous pairs (55% of 34 pairs) than non-incestuous pairs (14 % of 276). All first-order relatives that were familiar to each other divorced, whereas divorce was much rarer for non-familiar incestuous pairs (1 of 6), indicating that these fairy-wrens recognize their relatives by association. Non-incestuous pairs had higher likelihood of divorce if they previously had at least one EP offspring: EP offspring occurred in 21% of divorcing pairs that reproduced (compared to 8% in non-divorcing pairs). This suggests that divorce is important to obtain genetic as well as direct benefits from a permanent new partner. However, reproductive failure per se was not a cause for divorce. Instead, pair bonds of incestuous and non-incestuous pairs were terminated sooner by individuals in smaller groups, highlighting the cost of leaving a large group with many helpers. Predominantly females (in 75% of divorces) dispersed after divorce, and they moved to higher quality territories. This shows that divorce, and by extension mate choice, must to some extent be considered a side effect of territory choice. Taken together, our findings suggest that mostly female fairy-wrens strategically leave an incestuous or otherwise suboptimal partner, and that social benefits of cooperative breeding as well as territory quality inform the decision to disperse and divorce