If you’re reading this installment of “Mara’s Minute”, you may have already made the difficult decision to broach the topic of divorce with your spouse, or you may still be struggling with the possibility of divorce and want to educate yourself as much as possible before taking that emotional leap of brining up the conversation. Today’s post is all about what I would do before filing for divorce to best prepare (if there is such a thing). While these helpful hints cannot make the actual divorce process any easier (the word easy does not exist in this context). The information outlined below may save you a whole lot of extra time and headache during one of the most stressful times of your life.
Step 1:
Channel your inner Sherlock Holmes, especially if you’re not the one who typically handles the household’s finances. But seriously…Start investigating what accounts and liabilities you and your spouse have, both joint and individual. Look at and copy checkbooks, credit card statements, mortgage statements, bank statements, tax returns since and even before your marriage, etc. Even if you believe this is going to be an amicable divorce, this step is best done when you and your spouse are still on speaking terms and before lawyers and other parties get involved. The idea here is for you to be able to create an inventory of your financial assets and liabilities to aid in the divorce process with topics such as asset division, alimony, child support, etc. You want to get as clear of a picture as humanly possible of you and your spouse’s financial life. The attorneys are going to go through the discovery phase of the divorce process where they essentially require each spouse to divulge all of their financial assets, liabilities, and expenses, but that process is sped up a lot if you already have the majority of that information at your fingertips. Said otherwise, the less time the attorneys need to spend during the discovery phase researching and finding the household’s financial information, the less money you will need to spend.
Step 2:
Get a good feeling of what your monthly expenses look like, so you have an easier time building a post-divorce budget. Once you have completed Step 1 and have statements collected for credit cards, mortgages, etc., you may have enough resources to come up with at least a rough budget. Keep in mind this budget will naturally include expenses from your ex-spouse (i.e., your grocery bill) and expenses that may no longer be on your income statement once the divorce is finalized (i.e., if you do not keep the house and therefore no longer have a mortgage), so the initial budget figures will likely change once the divorce is final. Again, this initial budget, while rough, may help create the framework for you to then develop a more detailed and accurate budget once we know the terms of the settlement. Of course, the presence of children and child support / alimony payments may cause this budget to actually increase after the divorce, but having a baseline for your spending is the bottom line.
Additionally, this budget you’re creating may play a huge factor in the actual divorce settlement. If you are not the breadwinner in the family, but you have grown accustomed to a certain lifestyle due to the soon to be dissolved partnership, and you have the receipts to prove it, your attorney can push to get you an alimony agreement that will allow you to continue to live the life you are used to living.
Step 3:
Bring in the professionals, or at least know what’s out there. Each divorce is different, but most people think the only way to finalize a divorce is to duke it out in court. There are a few other avenues, called alternative dispute resolutions (ADR’s), that depending on your situation, may save you a lot of time, money, and heartache. The main ones to highlight are:
- Mediation:
A good option for a divorcing couple that wants to (and are able to) come to a settlement agreement among themselves with the help of a mediator. The mediator works as an independent third party to help the couple reach their divorce settlement. Rest assured, many states require a specific certification for someone to be able to act as a mediator, and some are or were divorce attorneys who believe mediation is a much better approach to divorce. Still, always do your research before choosing a mediator to work with.
- Arbitration:
A good option if you and your spouse can’t agree on a settlement option like with mediation, but don’t want to go to trial. With this option, the arbitrator has the power to make the decisions regarding the divorce settlement. The couple would meet with the arbitrator (this could be with or without attorneys) and present their cases with evidence supporting their positions. Evidence can even include expert witnesses, testimony, and other forms of proof with this option. Keep in mind, in many states, the arbitrator’s decision is binding. I like to think of arbitration as Divorce Court Lite. You might not like the result – and neither may your spouse – but that likely will be the case too if you spend gobs of money on attorney’s fees.
- Collaborative Divorce:
The teamwork approach to divorce. The divorcing couple would have a team of professionals to help with the financial, legal, and psychological sides of divorce. Each team member will assess the family’s needs using their individual expertise and then comes to the table, so to speak, with their recommendation and then collaborates with the other experts, including collaborative law attorneys, to help the family reach a settlement. The one caveat here is that there cannot even be an utterance of going to court or threatening to do so. This strategy is basically a binding agreement to try to settle the divorce as respectfully and honestly as possible, and if you break that pact, the collaborative process is terminated, and the lawyers are disqualified from any involvement in the case from that point on.
CDFA®’s can play a huge role in any of the above-listed ADR’s. In the first two options, Mediation and Arbitration, CDFA®’s may help collect key information about the couple’s finances, run analysis and build projections to show the short and long-term effects of various settlement options, and discuss these various options with the couple to make sure everyone is on the same page and has a full understanding of what all the moving parts mean. In the third option, Collaborative Divorce, CDFA®’s may serve as the teammate with the financial expertise needed to accomplish the tasks mentioned above including collecting and organizing financial data and building projections to show settlement options that best serve the needs of the family. Too often there is one party in the divorce that ends up with the short end of the stick simply because they do not understand the financial or legal jargon. Divorce attorneys often welcome the participation of CDFA®’s because attorneys are well aware they are not financial advisors, and are happy that they get to focus only on the legal issues at hand and that their clients do not have to pay them fees to do something outside of their areas of expertise.
