The Reviewing Attorney in Divorce Mediation

Divorcing parties who enter Divorce Mediation are generally advised by their mediator to have the final agreement reviewed by their separate attorneys before signing. For the client who wants additional assurance that the agreement coming out of the Divorce Mediation process is equitable, having separate counsel review it prior to signing can address that concern, if the reviewing attorney is involved at the beginning of the case.

Since it is only the client and not the attorneys who actually take part in the actual mediation sessions, the challenge in reviewing the parties’ final agreement is that the attorney was not privy to all the considerations and detailed information that led to the final decisions. And, to do the research and duplicate all of document reviews and analysis that occurred in mediation is not cost effective and it defeats the purpose of efficiency built into mediation, as well as the focus on client centered decisions that characterize divorce mediation.

However, what the reviewing attorney can do at the outset of the mediation and continuing through the mediation process is to pay special attention to the viability and integrity of the process being conducted by the mediator. This will do as much as anything to assure that the outcome of the process will result in an equitable outcome.

Several examples of this are these:

If there is a residence to be purchased by one of the parties, what is the process used to ascertain a current residential market value and how will the amount of the buy-out of the other party’s equity interest be determined.  Are the parties’ going to decide themselves the residential value, will a market analysis be conducted or will an appraiser be hired to place a value on the residence? And, once the residential value is determined, what formula will be used to arrive at each party’s marital interest? Each way of proceeding has its own considerations for an equitable outcome.

Another example concerns the valuation of a professional practice or a business. This asset could be the most significant one owned by the parties, and how its’ value is arrived at is of import for each party. Do they decide themselves, is there a standard formula that can be used to determine value or will a business valuation expert be hired to analyze and value the professional practice or business? Each of these ways to arrive at a value has its own challenges and the mediation client must be fully informed about the consequences of using each of the methods.

If the case involves spousal maintenance, and because the payment of spousal maintenance has tax consequences for each party, how will the mediator go about helping the parties know what might be the actual net dollar discretionary amount of varying amounts of monthly spousal maintenance payments?  Do the parties decide themselves, does the mediator make suggestions or is a financial expert brought in to help the parties know the tax consequences of their decision?

These are just a few examples of what a reviewing attorney needs to consider at the outset of the Divorce Mediation to be sure the integrity of the process is solid. If so, the reviewing attorney will be in a position to know whether the way the mediation is being conducted is viable and will allow for a fair result.

Entering Into Pre-Nuptial Agreements At An Advanced Age

Entering into a Pre-Nuptial Agreement “PNA” for couples contemplating marriage at an advanced age is a way for each to feel secure that what they have accumulated in the years prior to the marriage will be preserved. Later life couples who marry often want their individual estates to be handed down to their children after death, of, if the marriage does not work out, preserved for their retirement years. They often see that just because they marry does not mean the perspective spouse ought to have the right to part of their accumulated wealth. Entering into a PNA at an advanced age is also a way for the parties to focus on the relationship itself without being concerned about marital or sole and separate property issues.

There are certain basics that need to be part of a PNA which, if adhered, to will provide the solid building blocks for a viable agreement not subject to a successful challenge in the event of a later divorce. First among these is that each party is represented by an attorney who has fully reviewed the Agreement with each party prior to signature.

As important as legal representation is clear and unequivocal evidence that the perspective spouses entering into the PNA fully understand the Agreement by dint of their sound mental capacity. If there is any question about such capacity of a perspective spouse to fully understand the Agreement, a prior interview with that spouse by a psychiatrist or psychologist and a letter attesting to the spouse’s competency is advisable. In some cases, a video recording of the spouse, or of both spouses, in which they are questioned about the specifics of the Agreement and their full understanding of the terms is deemed advisable. This can put to rest any future claims that the Agreement was not fully understood for whatever reason.

Also important is that there be clear evidence that no coercion or duress exerted on either spouse pressuring them to sign the Agreement. A typical example is a PNA being presented to a spouse, sometimes for the first time, on the eve of the contemplated marriage ceremony, along with a threat that the marriage cannot (shortly) take place without the document being signed. Such occurrences will often nullify the Agreement.

As to waiver of payment of spousal maintenance, such waiver is a valid term in a PNA. However, if the waiver results in destitution after divorce for a party who would normally receive such support without a PNA, such a waiver may well be nullified.

If a PNA is being considered by parties contemplating a marriage, being represented by counsel is the way to best assure that such an Agreement will hold fast in the face of a later challenge.

The Task of the Financial Professional in a Collaborative Divorce Case

The Financial Professional in a Collaborative Divorce case plays a significant role in the process. The Financial Professional must ascertain through diligent document review and examination of records, as well as by dint of experience and knowledge, the clients’ financial landscape.  This means whatever assets, obligations and financial goings on that are part of the clients financial portfolio must be thoroughly understood by the Financial Professional, and then clearly explained to the clients and the attorneys.

This task would be relatively straight-forward if the parties’ assets included only a residence, vehicles, several bank accounts, IRA accounts and credit card debt. However, few cases are this straight-forward. There may be retirement plans that were contributed to both before and after marriage; there may be a business owned prior to marriage that experienced financial growth during the marriage; there may be a residence owned prior to marriage that remained in the owner spouse’s name but  whose mortgage was paid with monies generated by the martial community; there may be an inheritance received  by one spouse, normally sole and separate property, that was used in various ways to benefit the marital community.

These are just a few examples of some of the more complex issues that must be sorted out and understood by the Financial Professional and then presented in a way they can be clearly understood by the parties. Such understanding is required before a discussion of the financial issues can commence and a final disposition of the financial issues undertaken.

As important as the foregoing tasks may be, equally important is the Financial Professional’s complete neutrality in the process. If there is any perception or hint that the Financial Professional has not in all ways maintained neutrality in the process, the entire collaborative effort may be irreparably harmed.

The work of the Financial Professional has a significant impact on the parties and the integrity of the process itself. This is why the Financial Professional selected to be part of the Collaborative Team has been extensively trained and has had years of experience working with clients in the financial arena.

Divorce Mediation’s Rational Approach to Spousal Maintenance

While some jurisdictions are moving toward a formulaic approach to the payment of spousal maintenance, leaving little room for a full review of the parties’ circumstances, many jurisdictions still provide only the most broad of guidelines for decisions around the amount of spousal maintenance paid.  For these latter jurisdictions, using a rational approach to ascertain the amount of spousal maintenance paid may be more time consuming and difficult, but it most often results in more equitable settlement that more closely reflects the parties’ actual circumstances.  The approach I like to take in my practice first looks at the facts on the ground in order to arrive at an agreed upon spousal maintenance payment.

It starts with a thorough analysis and review of the reasonable living expenses of each party. While this review opens the possibility of argument about this expense or that, parties are advised and cautioned in several ways. They are asked to review their historical spending from such sources as credit card statements, checks and receipts, so the expenses stated are accurate. And, they are cautioned that because their stated expenses are at a certain level of spending does not mean this level can be sustained in their new circumstances or the total income pool available is sufficient for such spending.   And, they are advised, if the spending level they wish to enjoy is important enough to them to maintain rather than decrease, then additional income sources (i.e. further employment) may be needed to meet their wishes.  The parties are advised that the expense budget is primarily a reality tool to ground them in their new two-household circumstances and the impact this may have on their lifestyle choices.

The tool that most cogently focuses them in their new reality is an expansive schedule of varying spousal maintenance payments and how each payment level affects each party. This schedule includes an after tax scenario for each party for each spousal maintenance payment level, for example, of $4000, $4500, or $5000 per month, whatever broad range of payments may be applicable to the parties’ income level – from the low to the high.  The schedule has lines at each payment level for each party’s:

1) Gross monthly income from all sources.

2) Monthly spousal maintenance payment.

3) Total monthly income, which includes the receipt of spousal maintenance for the payee and subtraction of the spousal maintenance payment for the payor.

4) Total monthly expenses.

5) Total taxes paid or deducted for each respective party.

6)  Discretionary (after tax) income remaining for payment of expenses.

7) Net income after payment of taxes and expenses.

This schedule provides an eye-opening, reality based view of each party’s income situation. Equitability is built into the schedule review, since it allows each party to see what both have left before and after their respective desired living expenses are paid. Vast differences in discretionary income are a compelling reason to narrow the gap, and living expenses that result in little or negative cash flow speak to a more realistic spending level.  As important, the facts speak for themselves in such a schedule and serve as a strong incentive for the parties to work together for an equitable solution to the amount of spousal maintenance paid.

 

Mediating The Property Settlement – Disclosure Of Assets

The role of the mediator in the divorce setting is multi-faceted. Legal information, counseling abilities and mediation skills are called on to support a mutually satisfactory settlement of the divorce issues.
One of the most important aspects of the mediator’s role is to ensure that clients are fully informed of the issues that are relevant and the options that are available before settlement decisions are made. This is especially important in the areas of asset disclosure.
In helping inventory a divorcing couple’s assets, the mediator must not only aid in their identification and valuation but also must be assured that all assets of the marital community have been fully disclosed. The use of effective methods of disclosure in mediation is crucial, since the normal discovery process used in the adversary system is rarely (though can be) used in the mediated divorce.
Prior to engaging in the mediation process, the parties have agreed in writing that they will provide a complete accounting of their assets by submitting financial statements, tax returns, bank statements, pension statements and inventories of real and personal property. They are also required to warrant in the final agreement that full disclosure has been made of all assets and obligations and a subsequent discovery of a failure to disclose will result in sanctions.
In addition to knowing how to evaluate financial documents, for example, matching a net worth statement with the information on a tax return, the mediator must listen with a “third ear” when disclosure of assets is discussed. Mediation is a personal and revealing process, and it is likely that people who are attempting to conceal or evade will communicate their actions in some way. The suspicions of a mediator with regard to lack of candor often are triggered by such clues as vague and contradictory answers and information, eye and body language that does not match verbal communications, or, frequently the suspicions of the spouse.
In addition to eliciting information in a non-judgmental way, a divorce mediator’s referral network becomes an important resource is uncovering assets. This network would include an accountant, financial professional, pension expert, in fact any professional who can assist in examining financial documents to make sure things add up or are appropriately valued by the spouse(s). Suggesting a referral to a professional is often sufficient for a party to be forthright. And, the findings of the expert will usually reveal hidden information, whether deliberate or inadvertent.
An important part of divorce mediation is that agreement has been reached prior to the onset of the process that the parties will fully disclose and fully cooperate in all assets of the mediated settlement profess. This agreement is a prerequisite for the parties continuing in mediation. If non-cooperation of any sort persists, including failure to fully disclose assets, a mediation impasse is called by the mediator, and the process will not resume until the issue is resolved. Fortunately, in mediation there is a self-screening process. Rarely does the individual enter mediation to get away with anything. Most often it is to settle differences cooperatively and peacefully and keep the family, especially the family with children, in good communication with each other.

© Copyright - Peter D Axelrod