Considerations Before a Divorce

Get to know your finances

Attorneys often use the term “in spouse” to refer to the spouse making the most money or having the most assets in the marriage or who has a better understanding of the marital assets. The term “out spouse” is used for the spouse who has fewer assets, a lesser income. Often, the out spouse does not have full awareness of the financial picture and yet during a divorce, that becomes one of the most important things to understand. Ideally, both spouses are honest with each other and lay all the cards on the table, rather than attempting to withhold information or assets which forces the other spouse to hire aggressive attorneys and accountants to uncover those assets. The more you share knowledge about your finances and the history of financial transactions during the marriage, the easier and quicker your divorce process will be.

Be honest with each other

a. If you are getting divorced, there is usually a breakdown in the trust you have with each other and yet during the divorce process, it is important that the parties be able to rely on each other to be honest and fully disclose assets and income. When trust breaks down, the divorce process becomes much more difficult and usually forces both parties to hire aggressive attorneys who then turn the entire process into a much bigger circus. In order to avoid becoming the clowns in the circus, try to compartmentalize your feelings towards each other and treat the divorce as if you were partners dissolving a business which means treating each other honestly and fairly.

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Consider mediation when the time is right

a. A peaceful settlement between the two divorcing spouses is almost always preferable to a knock down drag out legal battle. Assuming couples are being open and honest with each other and themselves, mediation can be a great way to expedite the divorce process while preserving the marital estate at the same time. However, one of the biggest mistakes couples can make is to rush straight to mediation at the beginning of the divorce process before they each have full knowledge of the assets and/or issues that need to be mediated. It is wise to consider mediation after all relevant information has been procured and exchanged with the other party. In a divorce, “honesty is the best policy” and mediation is a great way to capitalize on that virtue. Also remember that mediation can be used to settle some issues even if the entire case cannot be resolved which will make this life transition quicker and less expensive.

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Do not hire a “tough” attorney unless absolutely necessary

a. Often, one or both parties to a divorce feel that they have to get a “tough” attorney in order to “fight for their rights”. While it may become necessary to get a “scorched earth” type of attorney under extreme circumstances where one party’s demands or claims are outrageous, generally speaking, the only entity in a divorce that benefits from being aggressive is the attorney. While it may be tempting to retain a tough attorney to fight your domineering spouse, it is generally far better to separate your emotions from the business process and get an attorney who will help you focus on the resolution of the divorce and not the prolonging of it. Bear in mind that you can always procure a more litigious attorney if necessary, but we find that expediting the process and getting to a fair resolution quickly provides more immediate and long-lasting benefits.

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Work together to minimize the tax impact

Even when people are getting divorced and sometimes feel they are opposing each other, they should recognize that they are still financially connected and that their common enemy is the IRS or other taxing entities. Even though parties are often in an emotionally heightened state especially in the beginning of a divorce, it is imperative that each party finds a way to avoid making business decisions through an emotional filter. It is very helpful to find an attorney who understands the tax impact of the division of assets and/or to find a forensic accountant who can help the parties allocate their marital resources in a way that maximizes the benefit to both parties.

Get ready to reduce your spending

Every person considering or experiencing a divorce should prepare themselves for at least a temporary reduction in their standard of living. The income stream from one or both parties that formally supported the family now has to be stretched to support two homes once the parties separate. Other costs such as health insurance, childcare expenses, rent or mortgage, car payments etc. all need to be paid for two separate households and so naturally there will be a negative impact on the cash flow. Bear in mind that both parties will be impacted by this process which is another reason for avoiding protracted and expensive litigation.

Consider the future

While it is easy to feel that there is no light at the end of the divorce tunnel, it is imperative for everyone experiencing this life-changing event to look forward to a day when the divorce is over, the emotions have settled down, and you can pick up and go on with your life in a new, positive direction. It is important during the divorce process to maintain your health and well-being so that you are ready to begin your new path. While divorce is generally perceived of as negative, it’s all a matter of perception and you can look forward to the day you make lemonade out of your lemons. What unfulfilled goals do you have in your life? What preparations should you make now to help your dreams come true when you emerge from the tunnel? Once the divorce is over, the opportunities to significantly improve your life’s direction will emerge.

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Don’t make business decisions based on emotions

One of the biggest regrets many divorced couples have is that the divorce process got out of hand right off the bat and they both began hurling accusations or taking unreasonable positions often encouraged by aggressive counsel. It is important to separate your emotions from the business decisions when you’re going through a divorce whether the issues are child custody, division of assets, allocation of pensions etc. The angrier or more unreasonable one party becomes, the more the opposing party has to up the ante to protect themselves or to avoid losing face. These silly and unproductive battles can be knowingly or unknowingly encouraged by aggressive counsel. Remember, this is your case and these are your decisions to make. Separate your emotions from business decisions and share your emotions with your therapist and/or best friends.

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Do not let your attorney become your therapist

Family law attorneys charge by the hour and some love nothing more than listening to your problems for hours on end regardless of the impact on the divorce process itself. Attorneys are not therapists however and so one rarely obtains the emotional relief that they would get from sharing their emotions with a real therapist. Writing emails instead of making lengthy phone calls or providing bullet point questions to your counsel through an email or text can often be a much quicker and certainly less expensive way to communicate and to allow your divorce to progress smoothly. This is especially true in the first few months of a divorce before clients get their first invoice.

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Create a timeline for financial decisions made during the marriage

In many marriages, one party tends to make more of the financial decisions than the other and sometimes the “out spouse” knows very little about the financial transactions that occurred during the marriage or even the extent and location of marital assets. As early as possible in the divorce process, you should create a timeline of all financial transactions you are aware of and try to begin obtaining documentation (bank and brokerage statements, deeds, contracts, invoices etc.) To help you and/or your counsel better understand the evolution of assets in order to determine the rights of both parties to those assets, some important facts to consider are;

1. The assets each spouse brought to the marriage;
2. Contracts or other agreements entered into by the parties during the marriage;
3. Financial dealings with third parties during the marriage;
4. The liabilities that were created during the marriage; and
5. The source of all income and monies obtained during the marriage.

Being able to match financial transactions to the timeline of the marriage will help you and your counsel better determine your rights.

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Start developing your future financial plan based on reality not wishful thinking

Whether they are in a community property state where assets are divided 50-50 or and equitable distribution state where assets may be proportioned differently, many couples make the mistake of thinking that if the estate is worth $10 million that they are fighting over $10 million. In fact, they are almost always struggling to achieve some slight advantage in the middle where the ultimate division is 55/45 instead of 50-50. Most of the time, that difference is not worth fighting for but more importantly, as you begin contemplating how you will move forward once the divorce is over, you need to be realistic about what assets you will have to work with. Generally, it is always better to overestimate the cost and underestimate your ability to pay those costs. Also bear in mind that the first few years following a divorce can be difficult cash flow wise and so try to prepare for the future by being realistic.

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Do not hide assets but do identify what you owned before marriage

Many divorces begin with the breakdown of trust between the couples and that mistrusts usually carries into the divorce process where the suspicions easily become exaggerated by attorneys, forensic accountants, and others. Even if you feel that you cannot trust your spouse, maintaining your own sense of integrity and honesty will benefit you both in the litigation and its aftermath. It’s important to be realistic and pragmatic about the discovery process and the financial declarations made by your opposing spouse, but it is absolutely imperative that you maintain your credibility and honesty at all times throughout the process regardless of what the other party does. Hiding assets almost always backfires and even in those rare cases where it doesn’t, the bad mojo created will always come back to haunt you.

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Do not rush the divorce process but do keep up the momentum

a. Almost as soon as a divorce begins, one or both parties start focusing on when the process will be over. In most states, there is a mandatory waiting period of six months or a year which gives both parties time to gather and share financial information and prepare the marital estate for division. Pressuring your attorney to make the process faster is usually not productive but responding quickly to requests for documentation or access to financial information and/or providing information that you know will eventually be needed before it is requested will save time and money. The most precious resource in the divorce is time. Life is short and the quicker you get through the divorce process the more time you will have remaining to live the rest of your wonderful life. Stay focused on the goal of completing the divorce and practice your breathing and stress techniques.

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Be careful taking legal advice from friends

As soon as your friends become aware of your divorce proceedings, you will probably experience a torrent of free advice usually filtered through their negative experiences. While it is totally understandable that you listen to their experience and/or ideas, it is important for you to realize that every divorce is unique and that your circumstances are probably different from what they went through. Reacting to events in your divorce because they have something in common with your friend’s divorce is usually not the best path for you. It is important to take the advice you receive from others with a grain of salt – which is usually more palatable if it’s followed by a shot of tequila.

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Try to identify all issues as early as possible

a. As soon as you start contemplating divorce, you should also begin listing all of the potential issues that may arise during the process. Child custody, child and spousal support, living arrangements, documentation of financial transactions, procuring an attorney, maintaining relationships with third parties and a myriad of other issues will come up and affect your life to varying degrees as you go through the divorce process. The more you know at the beginning of your case, the sooner you will be able to resolve those issues. The sooner you identify the issues, the sooner you can begin to address them. Do not let them overwhelm you, however. A divorce can sometimes feel like a big messy garage with so much clutter and confusion that you feel stymied when, in fact, just as you ultimately clean the garage by moving one box at a time, so too in a divorce you address issues one at a time and eventually they are all behind you instead of in front of you.

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Do not discuss your divorce in social media

Whether you have children or not, never divulge facts about your divorce in social media. Social media is available to the public and as such, can be presented as evidence in court. Statements you make on a public website may be presented by the opposing party’s counsel as “admissions by a party opponent” which is one of the exceptions to the general hearsay rule that is applicable in all jurisdictions. As soon as you know you are considering divorce or as soon as you are served with divorce papers, go to all of your social media sites and restrict access and take down any negative comments you’ve made about your spouse, or anyone connected to the proceedings. Better to be safe than sorry.

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Never make decisions when angry

Just as we encourage you to make business decisions without emotion, you should not make decisions when you are angry or feeling hurt which usually leads to some form of need for vindictiveness or retribution. Often, it is wise to expand the “count to 10” rule to the three-day rule where you take three days or more to calm down and make sure that you are making the right decision about any aspect of your marital action.

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Always check the numbers before signing any agreement

Even if you have counsel, always double check and triple check the numbers enunciated in any agreement because you will be bound to those numbers once your judgment has been filed with the court. Attorneys are not accountants and often are not as attentive to exact numbers as an accountant might be. Conversely, accountants are not attorneys and therefore they do not necessarily check all of the numbers that are included or addressed in a marital settlement agreement or judgment. Remember, this is your case and your money and your assets. Check and crosscheck everything because it’s hard to undo even innocent mistakes once they are made.

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Be open to communicating with your spouse even though you are getting divorced

Usually, a breakdown of the marital relationship also means a breakdown in the sense of trust between the spouses who are now opposing parties. Sometimes, distrust is warranted especially when one or both parties are not being open and forthright with all financial information. Even if you do not trust your spouse or have lost respect for them or have other negative feelings, remember that the best way to preserve your assets for your own benefit is to find a way to communicate openly and honestly with your spouse. Of course, if you can communicate openly and honestly with your spouse then why are you getting divorced you might ask? Bear in mind that you can always change your mind.

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Be completely honest with your attorney

It is in your interest to make sure your attorney is aware of all pertinent facts that could affect your divorce whether those facts are related to finances or to other issues. Failing to be honest with your attorney almost always ends up costing you more money as new revelations almost always require more discovery and elevate any sense of distrust that might already exist. Even if there is something embarrassing, if it has an impact on the divorce, your attorney needs to know about it.

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Try to avoid new relationships before the divorce is over

As tempting as it may be to jump right into another relationship, the involvement of an intimate third-party could greatly complicate the divorce proceedings especially if there are children involved. Depending on the circumstances leading to the divorce, a romantic relationship could feel to the opposing spouse like a deliberate insult that could cause an unpredictable emotional reaction through which could wreak havoc on the divorce proceedings. To the greatest degree possible and especially early in the proceedings, try to downplay the introduction of a new person in your life. This is especially important during custody proceedings where the possibility of a “new” mommy or daddy would greatly complicate custodial issues.

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Make sure to change your estate planning to reflect the new reality

Once one party has filed for divorce, it is generally a given that neither wants to leave any of their estate to the other. Accordingly, both parties involved in a divorce should also seek counseling regarding their estate planning and what adjustments can be made during the divorce proceedings and certainly what arrangements need to be made upon the conclusion of the divorce. Bear in mind that parties can often find compromise by leaving assets to their children so use that as a way to settle the case while minimizing the cost and maximizing the benefit to the entire family at the same time.

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Be civil with your spouse during the divorce process but do not become intimate

A divorce is almost always preceded by a breakdown of the communication skills between these spouses who are now becoming antagonistic parties. If possible, maintain your civility with your spouse and speak directly with them to resolve issues because ultimately the case belongs to the two of you and not to the attorneys or the therapists or the accountants. Ultimately, the final judgment is the equivalent of a contract between you and your spouse so being civil with the person you’re negotiating against is to everyone’s benefit. However, be extremely careful about crossing the line and re-engaging with your spouse on an intimate level unless there is a real possibility of reconciliation. Unless there is, any personal interactions with your soon to be ex could greatly complicate the divorce proceedings because of the emotional confusion it will create for one or both of you and because of the havoc it could wreak on the division of assets by affecting the date of separation which usually impacts both income earned and finances to be divided.

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Do not enter into oral agreements with your spouse – everything in writing

One or both parties can become impatient during the divorce and concoct agreements that are really not well thought-out especially if they’re not reviewed and approved by counsel. Every agreement needs to be in writing, and we suggest that every agreement be made in draft form subject to final approval, so you have time to think through the agreements you make. Although everybody is impatient and wants the divorce to end quickly, rushing can create problems and regret. If you and your spouse can come to reasonable agreements to settle your estate or your affairs that’s great, just do it in writing.

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Do not involve your children in the process but do keep them informed relative to their age

While every divorcing couples says that they are not going to involve their children, it is almost impossible to keep even the youngest children ignorant of what’s going on around them especially when there is a contest over the custody necessitating the involvement of therapists, custody evaluators, social workers etc. None of that is good for the children even under the best circumstances and can be devastating to them the more they are dragged into the conflict. Especially when they are young, it’s easy to believe that every day missed with your child is a day that you will never get back and there is some truth to that concept. However, try to also bear in mind the long-term goal of maintaining the relationship with that child who will first become a teenager who will one day become an adult. You will have many more years with your adult child than you will with them as children. Often, parties fight for exactly 50-50 custody when in fact, it’s not even convenient for one or both of those parties. Always bear in mind what is best for the children in making your decisions and let them know how those decisions were reached and make them a part of the process relative to their age and ability to comprehend the circumstances. Most children do not want to see their parents get divorced so the more you can soften the blow, the better for the entire family.

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