The use of mediation as an alternative to the courtroom has become increasingly popular, especially in the divorce process. It’s affordable, confidential and achieves results.
In last month’s blog post, I wrote about the many faces of divorce mediation for Houston area couples. Mediation, in one form or another, is now an integral part of most divorces in Texas and many other states. Some financial divorce experts, such as myself, have found it valuable to study and receive credentials in divorce mediation so we can better help couples work toward equitable divorce settlements.
As one expert observes, “the goal of mediation is to help you move on to the next chapter of your life as quickly as possible, with the least amount of stress and without depleting your children’s college funds or your retirement accounts in the process.”
Here some practical tips to help you and your spouse better understand and prepare for mediation process.
Your marital finances are the foundation of your divorce process
Organizing your marital finances is one of the first steps couples take after one of the spouses files for divorce. It is often referred to by attorneys as the information gathering or “discovery” process. However, if a spouse is considering divorce, he or she would be wise to begin this effort even before someone officially files — the earlier the better.
Start by listing all your personal possessions — ideally, on a spread sheet in columns under: wife’s separate property — through ownership prior to marriage, gift, or inheritance; husband’s separate property based on same criteria; then community property items bought during the marriage. High-value community property items such as collectibles, artwork, etc. should be listed on a separate line from basic household goods. Appraisals are occasionally warranted.
Gather all financial statements indicating the value, balances and/payments on all real property (the family home, rental properties, vacation homes), and vehicles (including boats, motorcycles, ATVs). For financial accounts, you will need recent statements on bank accounts (joint and separate, checking, savings), credit cards, retirement accounts, life insurance policies, annuities, stocks and other financial products. You will also need copies of your last three years of income tax records. Account for everything you own.
You’ll also want to gather records for all income sources: paystubs, self-employment profit-and-loss statements, pension disbursements, social security, alimony and child support payments received. Accuracy is paramount.
You will also want to itemize current recurring expenses as well as ongoing liabilities, so that all mortgage payments, car loans, health insurance costs, food, utilities, student loans, credit card payments, etc. are known.
Now is a good time to look more closely at your potential post-divorce budget. This will help you gain a sense of what you’ll need going forward. If you work with a Certified Divorce Financial Analyst, she will be able to help you with this project.
Creating a rough draft of marital assets and debts early in the divorce process will help ensure there is ample time to check its accuracy. This will serve as a roadmap of the financial factors to cover during mediation.
Figure out your own financial goals
Once you have a handle on your current marital finances, the next step is to figure out the best course for dividing it. This process can be challenging. Spend some time learning to understand your finances as they apply to short- and long-term value, getting a handle on what you will need in the future and reflecting on what’s truly important to you.
It is also a good time to try to look at your finances as unemotionally as you can. Be sure to examine the short- and long-term implications of taking specific assets or debts. Again, this is where a Certified Divorce Financial Analyst can be a big help. I typically use specific, proprietary tools to help my clients gain insight into what their future finances may look like using various scenarios.
As in any negotiation process, you’ll need to figure out your range of acceptable terms—from everything you hope to get and the things you absolutely will not walk away without. In between those two extremes are variables that can shift during the negotiations.
(If you have children, keep parental access decisions separate from the financial decisions, and do not use one to influence your position on the other. Avoid trying to use custody or visitation wants in exchange for financial wants, whether or not it’s in the child’s best interest.)
If you have an attorney, he or she will likely choose the mediator. If you are doing a Cooperative Divorce/Early mediation, you may have more control over hiring a mediator. The more prepared you are for your mediation experience, the more productive your mediation will be. In my next blog post, I’ll offer some tips on preparing emotionally for the divorce mediation process.