Let’s assume the following scenario, for the sake of discussion. You are in a long-term marriage, which for whatever reason has run its course. You and your spouse have successfully raised your kids, who are grown and gone. The high earning spouse is the principal of a modestly sized small business, with about $1m per year in gross revenues. Additionally, the parties have two family LLC’s that own rental properties. However, the higher earning spouse has reinvested all surplus income (in good years) in the business, and has only a small 401(k).
The lower earning spouse has pretty much stayed out of the business, instead pursuing a successful career as an English teacher at the local high school, and has not earned a lot in comparison, but has good benefits and expects a comfortable pension.
The spouses really want to separate amicably, and each “wants to be fair”, but can’t find adequate resources online or elsewhere to know how to value their respective shares of marital assets and income, and what would be a fair result. In fact, they don’t know what questions should even be asked to get started. They don’t know the “known unknowns”, much less the “unknown unknowns.”
They do have neighbors who were in a similar situation, who each went and hired very competent (and expensive) divorce lawyers, and found themselves getting deeper into litigation. The process of a litigated divorce tends to promote hostility between couples, and the possibilities of coorperation are greatly reduced.
So, what is the solution?
Well one good possibility would be for this couple to do a bit of research and find out which lawyers in their area represent couples in a structured process called collaborative divorce. While there are other important elements to it, the core difference between this approach and “traditional” litigation is that the clients and lawyers all sign participation and retainer agreements that bind them to try to reach a fully agreed settlement. If any party later pulls out, and decides to go the litigation route, both lawyers have to withdraw and the parties have to get new counsel. This process is designed to align the economic incentives of all – the parties and lawyers to encourage them to hammer out an agreement that all can accept.
If the collaborative model is agreed to, the lawyers would select a trained facilitator, with a mental health degree and background, who would help the lawyers and parties get to that goal. In this case they would also hire a joint financial consultant, who would be able to assess and value all of the various assets and liabilities, together with the tax consequences, and recommend a plan that would maximize the net results for both parties.
Is this cheap? No.
Does it cost more than this couple trying to do their divorce on their own? Yes, in the short term, but given the many traps for the unwary in this scenario, it almost certainly will save both parties money in the long run.
Finally, will it be cheaper than a “litigated divorce”? Probably, but possibly not. However, as Oscar Wilde once pointed out, a cynic is “A man who knows the price of everything and the value of nothing.” [Lady Windermere’s Fan (1892]. It won’t be simple, or easy, or cheap, but it is far more likely to produce a balanced outcome, and the parties are far more likely to be friendly ex-spouses having taken this path. If so, there will be a huge non-monetary value to this at marriages, births, funerals, and grandchildren’s graduations for years in the future.
If you or friends find yourselves in a similar dilemma, you can get a lot more information from the International Academy of Collaborative Professionals (IACP). Their web site, has lists of collaborative law professionals of all types in your area.
Senior Policy Adviser