UncategorizedJanuary 19, 2021

Divorce Mediation: What you Should Know

Most people facing a day in court would avoid it if they could.  When facing divorce, that urge is just as strong. If you are considering divorce you need to also consider HOW you want to go through your divorce and know that you do have options. The first option you may want to consider is mediation. For the remainder of this article, I will be focusing on private mediation, likely with a non-attorney mediator, outside the litigated process. Using the private mediation process helps you and your partner reach a mutually beneficial divorce settlement.

So, Why Mediation? 

Besides the whole, court avoidance thing, if you have children, jointly owned real estate, and investments, mediation may be the wisest option for you. Once you have decided on a divorce, the next step is to decide how to split up your assets and set child custody, support, and visitation rights. A mediator is an impartial third party that guides a couple in the negotiations preceding the actual divorce.

Unraveling your marital ties is a very emotional thing in addition to the trust issues and hurts. During this time, many of us find it hard to stay rational, and a mediator can help you both reach the point where you can agree and compromise on important decisions. While a mediator can’t give legal advice, they can teach you to communicate more efficiently.  In a situation where you both desire to reach an amicable agreement and can stand to be in the same room, mediation may be the right choice for you. You can even conduct mediation over the phone or video conference if needed.

Mediator, Take the Wheel?

If you do choose mediation as an alternative, you still need to be prepared.  Divorce court is not a place to fly by the seat of your pants.  Neither is the divorce mediation.  It still comes with much of the stressful procedures of a typical case.  And if you go in unprepared, you may lose out on the settlement that you desire.

Mediators only work with you and your partner to settle the important decisions a divorce forces you to make.  They will not tell you what you should do.  Nor will they make decisions for you. So, think about what you want your life to look like when this process is done. And focus on what you need from the separation to get there.

Meeting with Your Divorce Mediator

When you go to your first meeting with your divorce mediator, bring a list of all your jointly owned assets, a valuation of your home, copy of a prenuptial agreement if you have one, copies of income tax returns, and retirement account statements. Take a notebook and pen and don’t be shy about asking questions.

Write down everything you need to remember and talk about fees. This is where having a financial expert like a CDFA® becomes paramount to the mediation process. The first meeting with a divorce mediator will be to assess your situation, get a feel for the chemistry between the couple, and to get to know the mediator. Keep in mind that not all mediators are created equal; you want to work with a mediator who has a good understanding of divorce issues and some legal understanding. That first meeting may be done together or individually.

Although the mediation is held in an office or meeting room, it should still feel like an informal atmosphere. The mediator strives to create a relaxed situation so that both partners can remain calm. One of the main goals of the mediator is to help the couple find creative ways to communicate and reach an agreement. Especially if strife does exist between the couple.  There’s no set frequency for a session because every divorce is unique. Some couples find they only need a few sessions, while others may need more.

Choosing mediation doesn’t necessarily mean not choosing to work with an attorney. It is important that you understand your legal rights throughout the divorce process. Some attorneys may be able to give some guidance through just consulting without having to formally retain their services.  Mediation is not for everyone, but it does serve many. Ultimately, being able to avoid court will make for a better day for the whole family.

For more information or questions please contact Next Step Divorce Solutions.

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Divorce Support, Pre DivorceJanuary 11, 2021

Common Money Mistakes Made During Divorce

For most people, the divorce process is emotionally draining and mentally exhausting.  Many people describe it as a time of being frozen, numb, being in a mental fog, or moving in slow motion. Despite that emotional and mental trauma, you will be expected to go through your finances with a fine-tooth comb to ensure that your settlement agreement is fair and equitable.  With divorce brain, that’s easier said than done, even for the financially educated!

Even if you feel like you are clear headed, here are a few of the most common money mistakes to look out for when getting divorced. 

  1. Underestimating post-divorce expenses.

You will be asked to do a financial disclosure that reflects your expenses AFTER the divorce. It is critical that you are realistic and don’t leave anything out. This information will be used to determine if spousal maintenance is necessary or not. You must be sure to include everything from your health care deductibles to anticipated home repair charges for the roof you need to replace next year. If you underestimate your expenses by $200 per month, that’s $2400 per year. Where are you going to get that extra money? When you’re the primary breadwinner this mistake could lead you to agree to pay maintenance that you ultimately can’t afford.  A Certified Divorce Financial Analyst™ will help you scrub your affidavit for errors and make sure that you don’t leave anything out.

  1. Believing that your attorney will handle everything. 

Your attorney is an expert in the law, not finances. Would you ask your doctor for advice about your car? No, so why would you expect your attorney to be an expert in finances?  The attorney’s job is to ask you to fill out your financial disclosure and take your word for it that it is correct. A good attorney will glance over it looking for any glaring errors but that’s about it.  The most commonly miss-valued asset is a pension. In some situations, the value has been left out all together and just assumed as a 50/50 split. There is so much wrong with that solution, but most people don’t find out until it’s too late. This is crucial when in some cases the pension is the most valuable asset in a marriage. I often see attorneys accept a present value statement from a pension as the correct value to include as marital property. It’s not. Not by a long shot.  A CDFA® can value it properly and make sure that tax ramifications are considered as well.

  1. Not Understanding Tax Implications

Not all assets are created equal. This is at least a common understanding however I still regular see houses be trades for equity in a 401k.  Not only do you need to understand the tax ramifications of that decision, that taxation on a home is different than taxation on a 401k, but also what quick cash you will need to get back on your feet and how you will access it. Getting cash out of a home is not easy and requires equity and the ability to refinance. Getting cash out of a 401k may be easier than the home BUT there are tax ramifications and it also takes time, in some cases months, through the Qualified Domestic Relations Order (QDRO) to access the funds. You need to at least have a basic understanding of the after-tax settlement division.

  1. Letting attorneys do the talking for you.  

The more you and your spouse can work out by just communicating, the more money you’ll save. I’ve seen many couples that could not bear to be in the same room, but consider the cost. If you have your attorney relay information to the other spouse’s attorney, you’re racking up bills upwards of $600 an hour because you refuse to talk. This makes sense to no one. Get over any anger and talk about what will work.

  1. Letting your emotions make your decisions.

So many people going through divorce just want to “get it over with.”  This is not the time to just throw your hands up and agree to a settlement just to be done with it.  This kind of thinking is why divorce so often leads to bankruptcy! A 50/50 split of assets is almost NEVER a truly equitable settlement. So, put the emotions aside, talk to your spouse.  Take your time and make sure you thoroughly understand what your future will look like after your divorce and be sure to hire the right experts to help you.

To avoid making financial mistakes in your divorce contact Next Step Divorce Solutions today to speak with a Certified Divorce Financial Analyst®.

-Tessa Elrod, CFP®, CDFA®

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Divorce Support, Pre DivorceJanuary 8, 2021

Getting Started: Divorce Support

Lost. Scared. Lonely. Shaken. Sad. Angry. Bitter. Relieved. Hopeful. These are just some of the stops along the emotional roller coaster that is divorce. It’s not anything that anyone should have to endure alone. As Divorce has become more common, there are now tons of resources available to help you survive the process with at least some level of dignity.

First, let me tell you the one resource not to rely on– friends and family!  They are trying to offer help but sadly, they are often misguided, uninformed, and can be downright damaging to your ability to think straight. Be particularly cautious of leaning heavily on friends or family that have walked their own divorce. It’s great to learn from someone’s experiences but I cannot stress enough that every couple and situation is different, especially in divorce.  Don’t get me wrong, they’re great for a shoulder and to keep you distracted and to remind you that you are loved.  All of which you will need during this ride.  But do your best to get advice from objective professionals and not biased family and friends. You’ll come out of this better for it.

A resource that I think everyone needs during the process and for at least a little while after is:

  1. A Good Therapist – There is just so much emotional trauma caused by divorce that you really need to talk it through with a qualified professional. A therapist will help you explore your role in the end of your marriage so you can get clear about your goals for the next phase of your life. This is the only way you can hope to form new relationships that aren’t doomed to repeat your past.
  • CDFA® or Financial Planner (CFP®) – The most common and paralyzing fear that nearly everyone feels in divorce is “Will I be ok financially?” It’s inevitable. Before you agree to any settlement, you really need a second set of eyes and some financial projections, so you know what you’re going to be looking at. It can be overwhelming to make such big decisions independently, knowing they are final and can’t be undone. Working with a financial offers you peace of mind that you’re making the best financial decisions possible, given the situation. Of course, I’m biased and would prefer that you find a Certified Divorce Financial Analyst (CDFA®) that has been trained specifically in the finances of divorce but like I said, I’m biased.
  • Consult with a Family Law Attorney – Divorce is done within a legal process, so it is important to at least consult with your local family law attorney for guidance. There are options in Texas the do not require you to retain an attorney, but if you choose to go that route you want to make sure you have done a lot of homework. Not all divorces or complicated but you want to make sure a DIY divorce doesn’t land you back in court post-decree and costing you more time and money than had you worked with professionals from the get go. If you determine hiring your own mediator is the best for your situation be sure they well versed in divorce.
  • Non-Profits – Almost every community in the country have non-profit organizations that offer divorce support. In Houston, Texas, we have the Houston Legal Aid Center | Houston Legal Aid Center.  Check your local community for similar resources in your area.
  • The Internet – Divorce has become big business. New resource sites pop up every day offering a wealth of free information, downloads, blogs, referrals, directories, etc. It can be somewhat overwhelming so just pick out what you connect with and leave the rest. Go slow. Be kind to yourself.  Also, Meetup.com is a great resource for local divorce support groups. Going to a few is a good idea but don’t let yourself sink in too long. Recovery is supposed to be about getting better and I know too many people that stay stuck in grieving and never move on. Use a support group to move through the process and then – move on.

This is going to be a challenging time in your life. Ultimately, you will be stronger, happier, and ok – as long as you choose to. Use the resources available to you to make good decisions for yourself. Today truly is the first day of the rest of your life.

For more information about working with a CDFA® contact us at Next Step Divorce Solutions.

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