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Knowledge Base

Divorcing in Turbulent Times

December 1, 2008

Written by CMDR Staff

 

Change is blowing in from all directions, and the news is not all good.

We, and the rest of the world, are struggling with economic meltdowns, compounded by gyrating swings in the stock market and rock bottom consumer confidence indices.  As if this were not bad enough, forecasters predict more declines in the price of housing, intensified credit crunches, and increased unemployment rates.

What, then, are couples to do, as they face separation and/or divorce?  Do they “hunker” down and wait it out, hoping that the economy will recover before their patience runs out?  Certainly there are some who have drawn this conclusion, but they are in the minority.  Rarely is divorce a financial decision.

Given the realization that people will continue to divorce in bad times as in good times, it is only prudent to structure your divorce in a way that minimizes the financial impact on the family, now and in the future.  A few guidelines may be helpful:

When considering the division of property, the actual split between two individuals, it may be wise to structure the division in a manner that recognizes the current state of your finances and minimizes the economic repercussions.  For example, you do not have to divide assets that have been flattened by the stock market fall or sell depreciated real estate.  You do have to consider each of your financial needs and then work out present or future divisions with this in mind.  If, for example, your stock portfolio has been leveled, perhaps you should divide holdings into two separate accounts without selling.  Or, if one party is buying the other out of real estate or, say, retirement funds, it may be prudent to structure the agreement with consideration of the fact that prices might fall (or rise) quite dramatically by the time the actual division takes place.

Care with details and an understanding of possible events may prevent buyouts based on dollar amounts that in the future may no longer be workable.  If, for example, you agree to pay your partner $200,000.00 for his/her share of a piece of real estate and the equity in the real estate declines, there may be insufficient funds to effect the transaction.  Yet the deal cannot be changed.  Unless there was fraud, a property agreement is not subject to future revision after divorce.

The same words of caution pertain to support agreements.  You need to think of the possible scenarios that will render your deal unworkable in the future for one or both of you.  In planning your agreement, you need to contemplate future what ifs – positive and negative – and build in terms to prevent a catastrophic end result.  Whereas some support agreements, certainly those pertaining to children, are open to future reconsideration by the court, most couples prefer terms that allow for contingencies within their agreement rather than depending on the court for recourse, again and again.

At the Centre for Mediation & Dispute Resolution, we have been calling for creative and intelligent planning long before the stock market took a dive.  A good agreement, we have long said, is one that leaves all family members whole and that works.  A fair and unworkable agreement is simply a house of cards, doomed to fail.

We believe that these turbulent times call for special care and vigilance, not to mention creative thinking.  The problem-solving process of mediation offers a unique opportunity to structure agreements that do not become casualties of the times.  All this said, and we haven’t even mentioned the cost and time saving components of mediation, which certainly add an extra plus in these troubled times.

Divorcing couples would do well to run a cost comparison when considering their divorce strategy.  They should ask:

·      If we have only independent counsel throughout the process, will we be able to consider different solutions and approaches in an effective and efficient manner?

·      What will we have to pay for retainers just to begin the process?

·      Will I ever really know what my spouse is thinking or will it always be filtered through counsel?

·      Can my spouse and I use a mediator to craft our own agreement, subjecting it to independent legal review, thereby dramatically reducing legal time and cost and, most of all, ending the adversarial posturing and its significant costs?

At the Centre for Mediation & Dispute Resolution, we believe mediation is often the strategy of choice.  In troubled economic times, it adds another plus, the incentive to create a more detailed and thorough agreement and to save money.



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