The vast majority of divorce cases in the United States are resolved by way of settlement, the current estimated percentage being between 90% to 98%. This is likely because the benefits of settling tend to outweigh the prospects of trial. It is said that amicably resolving an inherently contentious case—especially one within the realm of family dissolution—yields fewer expenses of litigation and promotes civility between uncoupling parties. Further, settlement is said to lessen prolonged conflict between parties such that they are unlikely to continuously seek judicial intervention in subsequent actions. Settlement is consistent with one of the main objectives of the judiciary—reducing the risk of litigants returning to the courtroom. It is because of these benefits that I always counsel my clients to be open, and remain open, to the possibility of settlement.
Whether you are engaging in private settlement negotiations with your spouse or you are heading into mediation, it is important to be mentally and physically prepared for this conversation. This is particularly true if the financial aspect of your divorce keeps you awake at night. In terms of mental preparation, if you aren’t already there, shift your motivation for settlement such that your mindset is less “I just want this over with” and more “I am looking forward to my new beginning.” As to physical preparation, arm yourself with the knowledge and resources so that the terms of your settlement agreement definitively answer the question, “what do I need to do now to ensure my financial success for the future?” Please consider the following tips and tricks when negotiating the settlement of financial issues.
- Engage in discovery.
Discovery is a valuable litigation tool, and its use is encouraged when trying to get a complete picture of the marital finances. It is important to enter settlement negotiations with a full understanding of all assets—and debts—and make an informed decision on dividing those items consistent with your financial objectives. It is not enough for your spouse to represent an item is of a certain value; you will want to confirm that information with physical documents directly from the source and have those documents accessible during negotiations. Discovery is also a great process to help uncover any hidden assets.
- Consult with a financial expert.
Is there a marital business that needs evaluating? Is there a retirement or investment account with an obscure division process? Does the marital residence need to be appraised? Consult with and/or hire a professional who is knowledgeable about a particular financial concern before you negotiate settlement terms and put pen to paper. Hire a forensic accountant to dive into the financial records of the marital business. Speak with a retirement benefits professional regarding the proper procedure for splitting a particular type of retirement account. Hire an appraiser to evaluate the home. Making sure that the terms of the settlement agreement reflect accurate information and contain specific instructions for how to effectuate the division of a particular asset will save you time, money, and effort in the long run.
- Avoid rushing into settlement.
You and your spouse likely spent a considerable amount of time carefully fitting the puzzle pieces of your once-separate lives together to create one, complete picture that was your marriage. The puzzle should not be quickly torn down as you face dissolution but instead, strategically pulled apart such that every individual piece is accounted for. If your spouse presents you with a draft of a settlement agreement, read it thoroughly and consult with an attorney, who will review the proposal and advise you accordingly. Attend mediation with a third-party neutral such as a mediator, as that mediator is experienced in finding solutions to unresolved issues and challenging parties to consider (or reconsider) options for compromise.
- Understand your post-divorce expenses pre-settlement agreement.
Simply put, the financial life that you became accustomed to during your marriage will take on a different form once the court enters the Final Judgment and Decree of Divorce. So, whether you are negotiating to keep the marital residence and assume the mortgage tied to it or looking at an obligation to pay alimony, laying out your post-divorce expenses before entering into a settlement agreement will enable you to negotiate terms consistent with maintaining—or bettering—your lifestyle. Related to tip #2 above, consider hiring a financial planner to assist with this assessment.
Settlement can be a positive experience, so long as you do your homework and actively participate in the process. This is your new beginning. This is your future. Invest responsibly.