Most divorce cases settle at mediation or before trial. Generally, parties are required to attempt mediation before even scheduling a date for such a trial. Thus, given the important role that mediations play, parties may wish to consult financial experts to ensure that they emerge from their proceedings into a financially secure post-divorce future. While having a financial expert involved in your mediation can be expensive, talented financial advisors can be crucial to achieving overall success and preventing more expensive litigation.
However, not all divorces require the assistance of a financial expert. Most cases that do require such assistance share some combination of the following factors: (a) high net-worth marital estate; (b) complex finances; (c) the valuation of a business; or (d) complex disputes regarding what is, and is not marital property. Even if you don’t fall within all (or any) of the categories above, a financial expert could still assist your mediation experience in the following ways:
1. Assistance with Complex Financial Decisions
A divorce requires you to make important financial decisions with significant long-term consequences. Whether it involves a change in tax consequences, cash flow, retirement accounts, or your mortgage, these decisions require current and future financial planning in ways that many of us simply don’t understand, or never thought we’d have to navigate alone. As such, the role of a financial expert in divorce mediation often involves the communication of complex financial strategies, theories, and outcomes. An experienced financial expert who can communicate those conclusions clearly and understandably is not only beneficial to you but is invaluable in your ability to negotiate with the opposing party by providing the data and expertise to assist in the bargaining process – and by keeping you focused on an outcome that best supports you and your family in post-divorce life.
2. Assistance with Distinguishing Separate and Marital Property
For purposes of the division of assets during a divorce, property is categorized in one of two ways – separate and marital. Separate property is that which is obtained before the marriage, and marital property is that which is obtained during the marriage, with few exceptions. While the court will set aside separate property and make an equitable distribution of marital property, this process can become very challenging as the number of assets increases, or as separate property increases in value during the marriage. Courts will often have to enter Qualified Domestic Relations Orders to distribute pensions or retirement accounts, or they must determine the contribution of each spouse to a certain marital asset. As these issues involve complex questions of proof, financial advisors are often used during mediation to assist parties by performing tracing analyses to distinguish between separate or marital property, or by performing various calculations to determine their value. A skilled and experienced team can ensure that your separate property, and your property rights, are protected during these negotiations.
3. Assistance with Business Valuations
Any property obtained during marriage is considered marital property to which both spouses have a claim to receive a proportion of its value. Since a business has a net worth that can be divided, this includes businesses that were started during the marriage. Even with a business started before the marriage, an increase in the value of the business could be considered marital property and thus be subject to division. In divorces that involve the division of the value of a business, the valuation will generally be the subject of some dispute. As a result, in these scenarios, it is common for valuation experts from each side to be present at the mediation, and a good financial expert can help quantify that value, elaborate on the key issues or differences in valuations, and even assist the mediator in bridging the gap between those numbers.
4. Assistance with the Division of Assets
While each divorce is unique, property division is typically one of the most crucial and contentious issues that must be resolved for a divorce mediation to succeed. Since Missouri is a fair and equitable distribution state, marital assets are not merely divided in half but rather are divided in a way that ensures a fair outcome for both parties. As a result, the division of assets is often thought of as a puzzle, where parties piece together a plan to divide the marital estate based on several considerations, including financial and emotional evaluations. During mediation, an experienced financial expert can assist in this process by providing real-time decision analyses and by changing variables through the use of a dynamic model of viewing the marital estate. The flexibility of that dynamic model allows for more proper shifting of assets and liabilities from one party to the other, such as by calculating an equalization payment due to the illiquidity or lack of transferability of certain assets. Creative solutions in this regard often help bridge positional asymmetry which prevents settlement during mediation.
5. Assistance with Calculating Maintenance
Duties of spousal support tend to create feelings of resentment for both the party seeking support and the party paying support due to its creation of a dependency relationship between former spouses. As Missouri has adopted the position that individuals are presumed self-sufficient absent a contrary showing, financial experts can assist clients in understanding whether their finances permit the reception or paying of maintenance, and understanding what amount, structure, and time value is fair under the circumstances. A financial advisor will assist in the decision-making process of mediation by providing contemporaneous time value of money calculations to assist parties in negotiating an amount that best fits their unique needs, whether they are the recipient or obligor.
Despite how we typically think of divorce as a contentious process, mediation often provides a collaborative method of dispute resolution. While the costs of mediation can be high, it often pales in comparison to the costs of going to trial. As most states already require that parties attempt mediation, it’s prudent to consider involving a financial expert either directly or indirectly to assist in that process to increase the chances of a settlement that meets the individual needs of yourself and your family.
Should you need the assistance of an experienced divorce attorney in Creve Coeur and O’Fallon or have questions about your divorce situation, know that we are here to help and ready to discuss those questions with you.