Monday, September 29, 2008
I often have prospective clients call and say that they want an uncontested divorce. Most of the time, that means that both husband and wife have agreed that they want to get divorced. When we ask a few other questions about some of the basics of a divorce (custody, child support, who gets the house, how to divide the retirement assets, etc.), we usually find either that no agreements have been discussed or that there are certain issues where there is definitely conflict.
Many people confuse "uncontested" with "no fault". Those people want to have a simple divorce with as little conflict as possible. They don't want mud slinging. Nevertheless, even relatively friendly people can require a lot of help to get to the point of agreement.
Aside from sometimes needing help to be able to be civil with each other, divorcing couples usually need professional help when there are significant assets and/or liabilities to allocate between the parties. Tax considerations may come in where someone may not expect them. For example, $100,000.00 from a retirement fund may not be worth (net) as much as $100,000.00 in house equity. Likewise, the retirement fund may work out better in the long run for one party if s/he isn't able to take care of, and pay for, the house. There are many considerations to be made in reaching an agreement in a divorce. Sometimes both parties are financially unsophisticated and sometimes just one party is unsophisticated, which puts that party at a disadvantage in negotiations.
1. The Good: True uncontested divorces are cheaper and faster than contested ones, by a longshot. They are also less destructive to family relationships, which is very important when kids are involved. Uncontested divorces can be a great way to get what you want, rather than leave the decision up to a judge who doesn't care about you.
2. The Bad: The parties, or one of them, may agree under duress from the spouse. The result is sometimes an unreasonable deal because of pressure, threats, guilt or a desire to save the marriage by being generous in settlement. Obviously, some of the pressure comes from the spouse or other family members, and sometimes it is self imposed. The problem is that once the deal is done, and the situation changes, the deal can't be undone.
3. The Solution: Not surprisingly, the best step is to get professional help. An attorney may be needed, a financial expert might be beneficial and a counselor may help a party make rational decisions. Unless there are no children involved and there's insignificant property and little or no debt, the parties should get help. When there are significant assets or liabilities, there is enough at stake to at least warrant a consultation, and full representation is advised. Spending a little time and money to protect your financial future is a wise decision. A good attorney will ask questions about the issues and agreements when you come in and will follow that with advice on how to reach a settlement. You can save time, money and grief, even with an attorney involved, but be sure you choose carefully. Make sure the attorney's experience and approach match up with how you want to proceed. It's your choice.
Thanks to Dan Nunnely of Tulsa, Oklahoma who had two thoughtful posts about uncontested divorces in his Oklahoma Family Law Blog.
Friday, September 19, 2008
As William Wilson recently noted in his Indiana Family Law Blog, spouses often spend more time getting ready for a barbecue than they do getting ready for mediation. From my experience, I have to agree. While they are usually cheaper than going to trial, mediations involve a significant financial investment by each side, but the upside is that about 80-90% of the time, around here, a case settles in mediation. (Keep in mind that in baseball, the greatest hitters connect only 3 times out of 10.) In spite of all that potential for success in mediation, there seems to be little preparation in many cases.
What can be done to improve the odds of success or get better settlements? Here are some ideas:
- Clients should really become familiar with how mediation is practiced in their area. In Texas, we most often use the caucus method with the parties being kept in different rooms and the mediator moving back and forth between rooms. We also have attorneys present in virtually every mediation. In many other places, the parties stay in the same room throughout the process and often don't use attorneys. Both ways can be successful, but the parties should know ahead of time about the style they will encounter. Many clients have a lot of anxiety about whether they will be in the same room with their spouse. If they will, they need to be prepared.
- The issues need to be clearly identified and thought out in advance. The attorney should help the party be able to state their positions concisely. Sometimes it helps to have an extensive discussion about goals so the client and attorney both know what their objectives are.
- The attorney needs to make sure that they have all the information they need. That includes updates with current values and balances on financial records, as well as any records regarding the children. Telling the mediator that you can get certain information later, or that you left the records at home, just won't cut it. The information needs to be present, current and organized.
- Make sure the mediator gets the pleadings and any relevant information in advance so that he or she can become somewhat familiar with the facts and issues of the case. That will save valuable time for negotiations while everyone is together.
- It's helpful to prepare charts and summaries to help manage voluminous information. Having a computer and spreadsheets can also be helpful.
- Have copies of documents and paperwork for you, the other side and the mediator. It's sometimes helpful for everyone to be looking at the same records at the same time.
- Think about the best alternative to a negotiated agreement (BATNA). If you can't reach an agreement in mediation, what is the best realistic outcome for you if you go to court? Is it worth taking the risk?
- Think about the worst alternative to a negotiated agreement (WATNA). If you can't reach an agreement in mediation, what is the worst realistic outcome for you? Is it worth taking the risk?
- Spend time in advance to brainstorm possible solutions that you might propose in negotiations.
- Try to anticipate the other party's issues and possible solutions. Plan out how to respond to them. Be prepared to agree to some issues and consider how to try to persuade them to change or trade out on some of the other positions. It often helps to make some concessions to the other side so they can feel like they are winning. Figure out what issues you can fight for and then give in on.
- Keep in mind the many benefits you can get by settling, especially compared to the cost, time and stress involved in going to trial.
Sunday, September 14, 2008
Coming from an attorney, you would expect the answer to be "yes". That is generally my answer, although I have changed positions on it over the years. Many years ago, I sometimes thought it was not necessary for someone going through a "simple, uncontested divorce" to use an attorney. That may have been true is some cases 25 or 30 years ago, but as family law statutes have become more complex and encompassing, the need for attorneys grows greater. Most divorces now are neither simple nor uncontested.
In addition, if you are interested in using Collaborative Law to resolve your divorce or other family law issues, each party must have his or her own attorney.
While some people cannot afford to hire an attorney, most people can find the funds to pay for an attorney. It may require going to parents, siblings or other relatives, even if you don't really want to. It might mean a bank loan, a loan from a 401K account or a credit card advance. Whatever the source, using an attorney will likely lead to a better result for you.
What can go wrong without an attorney? Many things.
- You may overlook an asset to be divided. Retirement accounts are sometimes omitted if an attorney is not involved.
- You may not aware of the proper way to divide some assets. For example, a qualified domestic relations order will divide a retirement account and provide for direct payments to the non-member spouse.
- You may not properly value some assets.
- You may trigger tax consequences that are unnecessary. Cashing in an IRA to divide it will cost taxes and penalties, and that can be avoided.
- You may assume that all assets should be sold and then the cash divided. Wrong!
- You may assume that the division should be 50-50. Not necessarily.
- You may create an unenforceable order for child support or visitation. Using the proper language is essential.
Those aren't all the potential problems, but they should give you at least a superficial idea of the dangers of divorcing or dealing with other family law matters without an attorney.
If you now accept that hiring an attorney is likely to benefit you, I would suggest this caveat: Research the prospective attorneys. I have previously written (here) about how to select an attorney and I recommend that you look at that post as well. Make sure you feel compatible with the attorney and that you can communicate well with him or her. Also, make sure the attorney fits financially with your situation. There are many quality attorneys around. Most attorneys will be happy to suggest other attorneys for you if you (or the attorney) believe the cost might be out of your budget range. Be sure that you don't over commit at the outset and leave yourself without the funds to pay future expenses. It is a much wiser decision to find an attorney who is also in your price range. Good attorneys are available in various price ranges.
For additional thoughts about this issue, I recommend a post from an excellent blog I just discovered by Jennifer R. Lewis Kannegieter of Minnesota.
Friday, September 5, 2008
Sometimes, sharing a house can save the parties a great deal of money by postponing the need for one or both parties to buy or rent another residence. That may make it possible to pay down their debts and maybe save up enough to afford a new home. Of course, whether that is feasible depends on how well the parties get along. Even if the parties aren't getting along very well, it may be possible for them to get counseling just to help them learn how to get along on a limited basis for the greater good. When there are children involved, improving the parents' behavior can have added benefits for the children as well as the parents.
Here are some possible strategies for dealing with a personal housing crisis.
1. Forget about making a killing in the real estate market -- just sell the house now! Most houses require some fix-up to get ready to sell. If the spouses will act like adults and work together (or just divide up the jobs), they can do some fix up and then come out in better financial condition. Once the house is fixed up, they need to cooperate in showing the house and keeping it in presentable condition.
2. Borrow money to avoid foreclosure until you can sell. Foreclosure really hurts your credit score, so if there's something left to protect, you should keep searching for sources of funds to borrow to make your payments until the house sells.
3. Divide up the house and each spouse can use parts of it. How difficult that is depends on how well the parties get along. If the parties coexist well, they can share a house for quite a while and split the expenses. If they don't get along, this isn't much of an option. If the finances are really in bad shape, one or both of the spouses need to make some adjustments in behavior so they can share the space without going to war.
4. If there are kids, use a bird nesting approach. In that system, the kids stay in the house and the parents take turns staying in the house while the other stays in an apartment or with family or friends. It provides stability for the children and gives each parent quality time with the kids.
5. Bring in the experts. You can work with a financial planner to come up with possible solutions that fit your financial ability and needs. Even though you may have run out of ideas for solutions, there may well be some ways to work through the situation. An expert in personal finances in divorces may help you discover new solutions. In addition, a mortgage broker may be able to find creative ways to refinance or get money out of the house, if needed.
If all else fails, you can have a receiver appointed and get the house sold to avoid foreclosure. That is a last resort because there often is little equity remaining after the sale.
Monday, September 1, 2008
Fears often have a major impact on how people make decisions. In an ideal world, decisions would follow a careful analysis of a situation and would include a consideration of the possible costs and benefits of a course of action. Unfortunately, such analysis takes time and effort, and many people succumb to the easier and quicker solution of just reacting to fears and assumptions that are readily available to justify bad choices. Here are some of the fears that must be dealt with when people consider using Collaborative Law to resolve disputes. These are the top 5 fears I have heard about over the past eight years. Other attorneys may have slightly different lists.
1. The process won't work and I will have to hire another attorney, and that's expensive. To me, that concern is the best incentive for the Collaborative Law process to work. Once in the Collaborative process, attorneys may not go to court on the case, except to prove up an agreement. In litigated cases, there's almost always negotiations and most cases settle at some point, but there's always the threat to take the other party to court if he or she doesn't agree to do what the spouse wants done. There is often a power imbalance in negotiations in litigation cases, and the threat to go to court often forces the other side to do something he or she might not want to do. Since both parties would have to hire new attorneys to go to court, the threat usually becomes a non-factor. Without the threat to go to court, the parties are forced to stay in the process and rely on creativity rather than force. The result is better agreements that both parties can feel good about.
2. The other party will hide information. Actually Collaborative Law, using a neutral financial professsional (FP) and a neutral mental health professional (MHP), provides better oversight than most litigation. The parties start out promising to honestly and voluntarily share information. In contrast to litigation, both attorneys assume an obligation to assure that all relevant information is provided to each side. The financial expert reviews the records, can seek additional records or explanations and analyzes the information received. The analysis is shared with both sides and options are generated together. The neutral MHP also helps assure that all relevant facts are provided. With two attorneys and two other neutral experts involved, it would be hard to hide information during the process. Of course, no system is perfect and experienced family law attorneys are well aware of the extent and nature of deception which is often utilized in traditional litigation. At worst, there is no reason to believe that Collaborative Law would make it easier to hide information than litigation does. In reality, Collaborative Law provides many more safeguards.
3. The process will be too slow. First of all, a contested litigated divorce will often take a year or more (I have had some bad ones last 3-5 years). A Collaborative case will only move along as fast as its slowest party allows it to move, but Collaborative cases usually will resolve much more quickly than a litigated case, unless the parties want to do otherwise. I have had some cases slow down and last a year or more, but that was what the parties wanted to do. A couple of times, we took off for two or three months because there was about to be a wedding in the family and they didn't want the stress of the divorce to detract from the wedding. We have also slowed down a divorce because of housing needs or employment situations. On the other hand, in some cases, we are able to wrap them up right after the 60-day waiting period (for all divorces) is up.
4. Collaborative Law is too expensive. When we start talking about bringing in a financial expert and mental health expert, sometimes clients get nervous about the cost. That would be understandable if we planned to have both experts attend all meetings with both attorneys and the parties. In reality, there are few meetings when everyone is present. While we usually have the MHP attend the joint meetings with the attorneys and parties, the FP normally works directly with the parties in gathering information, discussing the needs and abilities of the parties and preparing budgets. The financial expert will also do some preparation alone. There will usually be one or more meetings with everyone present, but they are relatively streamlined because of the preparation done by the FP. In addition, we have found that the MHP is able to keep the joint meetings on track and we actually work more efficiently and effectively in the meetings. Also, we often have the mental health professional (or sometimes a child specialist) work separately with the parties to resolve any parenting issues. The result is an efficient process that uses the skills of neutral experts and actually involves somewhat less attorney time than a traditional litigated divorce.
5. The other party won't cooperate. While that can happen (it often happens in litigation), it rarely happens in Collaborative Law cases. Both attorneys screen their clients to make sure the clients understand their obligations under the Participation Agreement before it's signed. When a mental health professional is used, she or he can be helpful in avoiding or ending such lack of cooperation. The MHP's role is not to provide therapy, but she or he will work with the parties so that they are comfortable and feel safe in the process. Both parties face the same incentive to stay in the process and they can only do that by cooperating. Lack of cooperation has rarely been an issue in the Collaborative cases I have handled.
If you are considering whether to utilize Collaborative Law to help resolve a family law issue, please discuss your concerns with a qualified attorney who has been trained in Collaborative Law. The process will not work in every case, but a trained attorney with experience in Collaborative Law can help you decide if it would benefit you.