Expert Help for Making Financial Decisions in Divorce
“Dividing finances in divorce is a bit like separating conjoined twins. The finances are so intertwined–the separation must be delicate, strategic, and well-planned.” Tess Worrell, family mediator
Conciliation-Mediation offers couples a context to discuss finances cooperatively. Rather than an adversarial process that pits spouses against each other—competing for the “their share”—the Conciliation-Mediator guides spouses to examine the needs of both people moving into life after divorce. Couples are given the flexibility and space to personalize their choices for using their resources to create stable, post-divorce lives.
Yet, sometimes more is needed. While mediators offer education about options, the mediator cannot advise. And, some clients need specific advice to plan for their future.
Even more importantly, divorce focuses on the present. People also need to plan for the future. Yet, many don’t have the expertise to know how their assets will work long-term, thus they don’t know which assets will best fund their goals.
A variety of experts can help:
Divorce Financial Planner
Divorce Financial Planners (DFPs) help clients define their financial goals (often listing important elements clients never considered), understand their assets, and project how those assets will perform in the present and in the future.
Clients often need to determine whether their higher priority is more ready cash now (as they re-enter the job-market or buy a house) or provision for retirement later. Understanding the future performance of assets helps clients discern which assets best fit their highest priorities. The same DFP can work with both spouses to help them each understand the needs of the other as they invest marital resources into creating a stable future.
When working with a DFP, clients should seek a person who both understands the financial goals and supports the cooperative process. Some DFPs take a more adversarial approach. Some even, unfortunately, stray into offering legal advice, which can create confusion and conflict for clients. Finding a DFP who focuses on helping clients, rather than pitting them against each other, proves vital.
Certified Public Accountant
Fortunately, in divorce, the transfer of most assets between spouses creates no tax consequences. Spouses can take equity out of the house, transfer bank accounts, or receive child support without tax liability—because the property is joint and belongs to both.
However, some decisions do have tax consequences:
Which parent benefits most by claiming the child tax credit?
What is the cost of invading a 401(k) for immediate cash?
Or, what is the effect of payment of a spousal interest in a business over time?
Clients do well to ask their CPA to review the proposed financial agreement and advise on all tax implications. This input helps clients make smarter decisions.
Attorneys offer clients perspectives on what is available through the court and the likely outcomes from the court. These insights help clients understand the context in which they are making decisions and, often, motivate clients to work harder to reach decisions in mediation.
For example, one couple came to mediation with $120,000 of equity in their home and $140,000 of debt. Debbie desperately wanted to keep the marital home to provide stability to their two, special-needs children. Joe agreed with this desire. Yet, the debt loomed large, and neither had the income to manage their payments.
The financial problems that had destroyed their marriage and their ability to trust each other made agreeing in mediation more difficult. Debbie expected Husband to just take the debt and leave her the house. Joe understood her desires, but couldn’t afford to do what she asked. Debbie sought an attorney to force Husband to do so.
Debbie’s attorney explained that, if the couple couldn’t agree, the judge likely would force the sale of the house. That input re-framed Debbie’s expectations and motivated her to engage more creatively with Joe. Because mediators cannot predict court outcomes, sometimes clients do well to gain perspective from an attorney who supports cooperative decision-making to specifically advise on likely outcomes. The attorney’s input helps clients gain perspective and engage in meaningful discussions.
Conciliation-Mediators offer both a process for reaching cooperative agreements and a wealth of information about options. More, mediators welcome whatever additional expertise is needed to create well-grounded decisions. Clients enjoy both the flexibility of personalized settlements and the security of sound decisions.
If you are considering divorce and are concerned about the financial aspects, we welcome your questions. Call 317-344-9740 or email info@TheResolutionCenterIndy.com. We look forward to serving you.