While making the decision to get a divorce can be difficult, it’s equally important to decide which path for the divorce process is the right one for you and your current spouse. There are three options:
It important to understand the interworking’s of each option before making a decision. For example, “trying” mediation in an attempt to save money could land you directly in a litigation battle without the opportunity to give the collaborative process a shot which may have been the right choice in the first place.
In working with our clients, we have seen mediation work for some couples and not for others. For couples that can make mediation work, it is usually the preferred method because it provides a couple with the more control over the timeline of the divorce process, more choices, and it’s usually the least costly of the three options.
Litigation is where each side “lawyers up” and you do battle in court. We have seen litigations that go on for years costing tens of thousands of dollars in legal fees on both sides. What many people don’t realize is only about 5% of all divorce cases end in a judge’s ruling. Instead, approximately 95% of the divorce cases end in a settlement between the two soon to be ex-spouses. So the obvious question is “why should a couple use their martial assets to pay large attorney fees if they can just reach an agreement themselves?”
In conjunction with the mediation process, a couple meets with a mediator with the goal of working out their own agreement with regard to distribution of property / assets / liabilities, retirement assets, taxes, child custody, child support, and spousal maintenance. The mediator serves as a non-bias guide as you work towards an agreement.
You can ask questions like:
“How is child support calculated?”
“What items do we need to consider for the child custody agreement?”
“How do we assign a value to our business?”
“What is the tax impact of splitting the retirement accounts?”
Overcoming Tough Issues
You may find that you are able to reach an amicable agreement on a majority of the items that will be included in your agreement but what happens in the mediation process for the handful of items that you do not agree upon? It’s the job of the mediator to help you to work through those tough issues. It may involve the mediator suggesting possible solutions or asking additional questions to obtain more information about the issue. By keeping the lines of communication open and asking additional questions, it can lead to elegant solutions that were not initially identified as an option.
While it’s important to keep the lines of communication open during the mediation process it may be a wise to agree on a set of ground rules for the mediation process. One of those rules may be that you cannot talk about the divorce outside of the formal mediation sessions. Sometime this is where mediation falls apart. Everything seems to be going great but you are working on one or two of those tough issues that’s preventing the final settlement agreement, you go home, get into a heated argument without the presence of the mediator to help reign the emotions back in, and the next thing you know the mediation process is dead because the spouses are no longer speaking to each other. Ground rules are an important part of the process.
Control Over The Timeline
One of the big advantages of the mediation process is it gives you a high degree of control over how long the divorce process takes from start to finish. You do not have to wait for replies from the other side’s attorney or court dates. The mediation process moves as fast or as slow as you would like it too. The mediation process is often completed in 3 to 10 meetings. According to www.mediate.com the average mediation case settles in 90 days.
Making The Mediation Process Work
Having seen clients go through this process, there are a few key items that need to exist for the mediation process to really work.
- The couple must be able to communicate effectively
- Both spouses need to feel like they can represent their own interests
- Both spouses need to feel comfortable making financial decisions
- There is general sense of trust and a willingness to compromise
If for whatever reason you can’t stand the sight of your soon to be ex-spouse, most likely mediation is not going to work. Both spouses need to be able to openly communicate with each other to reach an agreement.
Represent Personal Interests
If one of the spouses feels like that they cannot adequately represent their interests or feel intimidated about speaking openly about what’s important to them, the mediation process is probably not the right option. There are a lot of very important decisions being made in a relatively short period of time. It’s important for each spouse to be confident that they fully understand the terminology being discussed, the decisions that are being made, and the long term impact of those decisions once the divorce is finalized.
The Non-Financial Spouse
Since one of the important items included in the divorce agreement is the separation of marital assets, if you or your spouse is intimidated by financial terms or finances in general, it can jeopardize the mediation process. However, if this is the case, it’s important for the non-financial spouse to establish a trusted relationship with a financial planner that will help them to understand the short and long term impact of the financial decisions that they are making in conjunction with the mediation process. Items like establishing a budget, determining whether or not they can afford to stay in the marital house, retirement projection, paying down debt, the tax impact of child support, alimony payment, and other material items that will impact their overall financial plan post divorce. For the non-financial spouse, if this relationship is not established during the mediation process, it can lead to the downfall in the mediation process because the non-financial spouse may feel like they don’t even know the right financial questions to be asking during the mediation process.
Trust & Compromise
Negotiating in good faith and a willingness to compromise are key to making the mediation process work. As soon as one spouse thinks the other spouse is hiding something, it’s game over for the mediation process. It triggers that natural response, if he or she is hiding one thing, what else are they hiding?
Reaching an agreement requires comprise especially on the difficult issues. If either spouse going into the mediation process is unwilling to give up any ground, it will make the mediation process difficult if not impossible. Married couples pursing a divorce have to remember that same amount of income and assets that were previously supporting a single household are now being used to support two separate households. It typically costs more to support two households instead of one. Two mortgages, two sets of clothes for the kids, two cable bills, etc. Both sides typically have to adjust their standard of living after the divorce is finalized.
If mediation is not a good fit for you, instead of just defaulting to the litigation option, an option that is growing rapidly in popularity is Collaborative Divorce.
Unlike mediation where it’s just you, your spouse, and a mediator, in the collaborative setting each spouse retains their own attorney to represent them at the table.
The goal of the attorneys in the collaborative setting is the same as the mediator, to reach an amicable agreement between you and your spouse. In fact, the attorneys will typically sign an agreement that if the collaborative process fails and you are unable to reach an agreement, those same attorneys are excluded from representing you in a litigation case. In other words, no matter how much you like your attorney, you would have to find a different attorney if you end up in court. This is an important aspect of the collaborative process because everyone is driving toward a settlement agreement. In divorce cases, people worry that their spouse’s attorney will try to “stir the pot” and get their spouse worked up about certain issues. If the collaborate process fails, both attorneys are out of the picture.
Having your own attorney sitting next to you and negotiating on your behalf is what many people need to feel comfortable that nothing is being missed and the right decisions are being made on their behalf. If negotiations get too intense during a collaborative session you can take a break, regroup, and seek counsel from your attorney.
Who Is Involved?
In most collaborative divorce cases there are anywhere from 4 to 7 people sitting at the table:
- Your Attorney
- Your Spouse
- Your Spouse’s Attorney
- A Coach or Mediator
- Child Specialist
- Financial Specialist
The coach or mediators serves as a neutral. They coordinate the meetings, ask questions to help facilitate the negotiations, and help set and enforce the ground rules for the collaborative process. A child specialist can be involved in specific meetings to coordinate the child custody agreement or a financial specialist can be called in to assist in equitable distribution of the martial assets.
What Does It Cost?
Collaborate Divorce is not cheap. You have attorneys involved, a coach, and possibly specialists to help reach an agreement. However, the collaborative process provides you with more control compared to litigation. It provides you with more control over the duration of the divorce process and control over the terms of your agreement. Similar to mediation, the pace of the collaborative process is set by the parties involved. You do not have to wait for court dates. We have seen some collaborative cases reach an agreement faster than a mediation case because the attorneys were there to help push the process along.
It also provides you with more control over the terms of your agreement because you are not tied to “what the law says”. You can create solutions that work for you, work for your spouse, but are outside the boundaries of case law. Also you are not tied to decisions that are handed down by a judge that does not know you or your kids.
In many cases, collaborative ends up being less expensive than full litigation because the duration of the divorce process tends to be shorter since everyone is driving toward a settlement. But given the number of professionals involved in the process, it’s typically more expensive than mediation.
Litigation is what most of us think of when we hear the word “divorce”. You go out and find the best attorney that is going to make your soon to be ex-spouse pay!!! Sometimes litigation is unavoidable. As mentioned earlier, if you can’t stand the sight of your ex-spouse sitting across the table from you, then most likely mediation and collaborative are not going to work.
Litigation is usually the most expensive route to go. Attorneys bill by the hour and when you have court dates, your attorney will usually begin their bill rates as soon as they leave the office. Also they have to spend time replying to motions from your spouse’s attorney, preparing for court, and calling experts to testify in court. All too often, an attorney can look at the assets and income of a couple that is getting divorced and they can ballpark the amount of the child support, alimony, and an approximate asset split based on past settlement agreement. The couple then proceeds to spend months and sometimes years in court arguing about this, that, and other thing just to end up in the same spot but with less assets because both sides had to pay their attorneys $20,000+ in legal fees. It’s for this reason that the collaborative divorce process is gaining traction.
Hi, I’m Michael Ruger. I’m the managing partner of Greenbush Financial Group and the creator of the nationally recognized Money Smart Board blog . I created the blog because there are a lot of events in life that require important financial decisions. The goal is to help our readers avoid big financial missteps, discover financial solutions that they were not aware of, and to optimize their financial future.