Going through a divorce can be stressful. Going through a divorce with the right financial information can help alleviate some of that stress. The first step you can take is to meet with your financial advisor to review and discuss all elements of your financial plan. Your advisor may suggest a Collaborative Divorce, which is a shared commitment between partners to negotiate the terms of their divorce. We have laid out a few of the most common questions and answers about how to prepare financially for a divorce.
1. What are some common financial mistakes people make in a divorce?
- Not obtaining complete financial information. Create a financial checklist for divorce which can include retirement plans, employee benefits, and stock options.
- Thinking that retirement assets have the same value as an equal dollar amount of non-retirement assets
- Making isolated financial decisions versus looking at the big picture and analyzing how each financial decision impacts other decisions.
2. Are collaborative divorces gaining in popularity? When is it appropriate or inappropriate?
Yes, while Collaborative Divorce is a comparatively new way for married couples to resolve disputes, it is gaining in popularity as more states pass respective Uniform Collaborative Law Acts.
Collaborative Law is a form of alternative dispute resolution that allows separating and divorcing couples to resolve issues of custody, support, and division of property with the help of an interdisciplinary team, including each party’s own attorney advocate. The team works together in a transparent and non-adversarial setting that focuses on positive outcomes for the entire family.
Collaborative divorce works best when both parties are committed to open communication and information sharing. If there is mistrust or other legal issues then Collaborative Divorce is not appropriate.
3. How do the financial costs of collaborative law compare with those of litigation?
Collaborative Divorce is typically more cost-effective than going to court. In a Collaborative Divorce, the team model is financially efficient therefore costs are more manageable. In the beginning, the costs can be higher as the couple brings on professionals to support themselves (and their children). However, in litigation costs are unpredictable and can escalate rapidly.
4. What about mediation and its financial cost?
Mediation is the process in which the divorcing couple works out its problems, disagreements, and marital issues with a trained, impartial third party – the mediator. The mediator assists the couple in resolving their differences in a constructive way to reach a “win/win” decision rather than the adversative “win/lose” situation.
Like Collaborative, Mediation can be more cost-effective than a litigated divorce. There are typically not as many professionals hired with a mediated divorce.
5. What about when children are involved — how do custody issues affect the financial cost?
A goal of Collaborative Divorce is to assure that children are a priority, not a casualty. The child specialist, an individual skilled in understanding children, will meet with your children privately, assisting them in expressing their feelings and concerns about the divorce.
The specialist then communicates the child’s feelings, concerns, and hopes to the team to consider when planning for their lives. This can help with the financial cost as they too have a voice at the table to consider when making financial agreements.
6. Are there time savings in a collaborative divorce or mediated divorce compared with full litigation?
Yes, because Collaborative Divorce and Mediated Divorce are resolved outside the courtroom, it creates time savings as you do not have to wait for a Judge’s availability. It is up to the couple versus the court, to control the process.
7. How do I find the right advisor?
A Certified Divorce Financial Analyst (CDFA®) is great to consider for expertise and experience when preparing financially for a divorce. They can provide in-depth financial analysis and advice to attorneys and couples relating to divorce. Including tax law information, asset distribution, and creating an overall financial plan to achieve equitable settlements.
Ready to find the right advisor?
Whatever financial situation you may find yourself in, we can help. Contact us today.
This article was originally featured on MoneyGeek and written by: