Monday, February 22, 2016

How to Avoid Financial Mistakes in Divorce

If you are facing a divorce and are worried about how you will come out financially, you are not alone!  Most people who think about their future want to make sure that the divorce process works to protect them from being taken advantage of and from missing out on something they are entitled to have.

Karen Covy has an excellent blog and website  that discuss various aspects of getting divorced. In a recent post, she wrote about "10 Financial Mistakes in Divorce You Don't Want to Make".  She listed 10 important issues and it turns out that  Collaborative Law is an effective process to address each of them.  Here are her issues:

1.  "Not taking the time to do an accurate post-divorce budget BEFORE you settle!" 
We normally use a neutral financial professional for both parties and one of the standard steps is to prepare a budget for each party for after the divorce.  That helps everyone address the needs of each party as we work out a financial agreement.

2.  "Not insisting on getting all of your (and your spouse's) financial documents."  In Collaborative cases, we start with getting the current statements for all financial accounts and then get any other prior statements that are really needed.  We don't request statements just to request them.

3.  "Not getting assets valued."  If an asset, like a house, business or painting (or anything else) needs to be valued, we get a neutral expert for both parties to do the valuation.  If it doesn't matter or if the parties agree on the value, we don't spend the money to get a valuation.

4.  "Not looking at (and understanding!) all of your financial documents."  One of the great benefits of Collaborative Law is having the neutral financial professional who gathers, studies and organizes the financial records.  Either party can discuss the finances and get help understanding them.  The finances are also discussed extensively in joint sessions.

5.  "Relying on your lawyer to do everything."  In Collaborative cases, we make sure the parties are very active and participating in the preparation and in the discussions at joint meetings.  Most often, we have the parties meeting, without the lawyers present, with the mental health professional on children's issues and with the financial professional on financial issues.  There is a lot of work done without the lawyers being present.

6.  "Not understanding how taxes will affect your support and settlement."  We also discuss taxes and can arrange for a neutral tax expert if specialized knowledge is necessary. When we discuss alimony and property division, taxes are always a consideration.

7."Forgetting about the long term."  Collaborative professionals are very aware of the long-term implications of the negotiations and we can do projections into the financial future.  Considerations for retirement income are always very important.

8.  "Not thinking about insurance."  We look at insurance as an asset and also as a safeguard.  Insurance can be considered in the context of a long-term plan, but it's also the back-up for financial obligations that may continue after the death of a party.

9.  "Sacrificing your own financial security for your children." We try to be as realistic as possible in working out agreements.  There are many different ways to pay for the children's expenses and Collaborative Law provides more flexibility than Litigation does.  It is possible to protect your own financial needs while making sure the kids are provided for.

10. "Making settlement decisions out of exhaustion."  In Collaborative cases, we have a series of meetings, usually an hour and a half to two hours long.  In mediation in Litigation cases, the sessions are usually a half day or a whole day, which can be exhausting.  In court, you are likely to spend a half day to several days or a week.  Collaborative Law provides a safe, measured process without the pressure to get everything done at once.

Bottom Line:  If you have serious financial concerns, be sure to investigate Collaborative Law.  Talk with an experienced Collaborative lawyer.  You should get a second opinion if an attorney mentions Collaborative Law on a web site, but then spends the consultation time trying to talk you out of using the process.  With a lawyer like that, be sure to ask how many Collaborative cases the attorney has actually handled.  Before you decide, talk with a real Collaborative attorney.

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