Category: Legal Separation/Divorce

Divorce/Legal Separation/Divorce

What Makes a Mediator Effective?

This article went up last month on HBR.org.  The title says it all: “Antagonistic Mediators Can Make Resolving Disputes Easier”.  Huh?

Although we tend to think of mediators as “nice”, empathetic people, the article cites research that suggests that a different style could be more effective at times.  For the types of disputes studied, a “hostile” mediator generated greater willingness on the part of adversaries to reach agreement.  In a nutshell, a hostile mediator enabled the parties to ally against him/her to move forward to resolve their dispute.

What I think is important to note about these findings is that the dispute was a business dispute.  The relationship between disputants in that type of case is very different from one where spouses, former spouses, or family members are involved.  Emotional currents can run much deeper for folks who have been married, have kids, or are related; I find it harder to imagine that a “mean” mediator would be as effective with parties who are already in a difficult emotional place (or, perhaps the mediator doesn’t have to be “as” mean).

On a personal note, what struck me about the piece is that “hostile” is rarely how I relate to people.  Client feedback is that I’m calm, and helpful.  To act in a hostile manner would be inconsistent with my personality, something that would be apparent pretty quickly.  I think that the research results on the “Surprising Effectiveness of Hostile Mediators” will stay theoretically interesting.

 

Estate/Financial Planning/Legal Separation/Divorce

Mind Your Beneficiary Designations

“Beneficiary designation” is a mouthful.  It’s the kind of phrase that registers mainly as something you’ve heard before but not as a readily discernible “thing”.  What it refers to is a choice you make for who will receive proceeds from an account when you die, and it’s something you’ll want to keep current.

Often, if folks are married, they’ll designate their spouse as the beneficiary of an account:  a bank account, a retirement account, a life insurance policy, etc.  Folks might even update their designation during marriage to make their spouse the beneficiary.  The advantage of a beneficiary designation is that it tells the financial institution who should get the account, and a court doesn’t have to be involved.  (This is why accounts that pass according to a beneficiary designation may be called “non-probate” assets.)

When folks divorce, they may think about updating their will.  But, accounts with beneficiary designations might not get the same attention.  For some folks, Washington law can keep a former spouse from receiving a benefit:  Washington law automatically provides that, if a marriage ends, a beneficiary designation of a former spouse is revoked unless there’s express provision otherwise or unless a court order requires a beneficiary designation to stay in place.

However, for benefits that come through an employer–such as a retirement account–Washington law doesn’t matter.  Federal employee benefit law controls the outcome and there isn’t an automatic revocation of a beneficiary designation upon divorce.  For accounts of this type, that can have a huge financial impact.  In the Estate of Lundy, the unchanged beneficiary designation made the difference between almost $500,000 going to the former spouse of the Decedent, rather than into his Decedent’s estate.  Take home lesson:  Mind–and update–your beneficiary designations.

Legal Separation/Divorce/Money

Practical, Specific Divorce Information

This recent article offers practical, specific information about important financial considerations in divorce.  Don’t let the “late-life divorce” angle deter you.  The factors addressed in the article affect more divorcing couples than just those over the age of 55.

  • Tip 1:  “Right-size” your expectations.  In short, there are more costs with a divorce than before and rarely more resources.  The piece quotes a wealth strategist named Chris Chen, who says it costs an average of 25% more for the couple to run two separate households.  I’ve not seen this precise figure before, however it sounds like a reasonable point of reckoning.  A realistic financial plan for post-divorce life will take such cost increases into account.
  • Tip 2:  Work longer, aka delay retirement.  Increasing your life-time income will help offset the financial impact of a divorce.
  • Tip 3:  Be open to selling the family home.  The advice here is not to keep the family home if it is a heavier financial burden than the party can afford.  However, the likely “best option” of selling the family home may not be a simple choice from a financial perspective, given Seattle’s real estate and rental costs.
  • Tip 4:  Choose assets that will provide income, such as a pension.
  • Tip 5:  If there’s spousal support (alimony), guarantee that income stream with life insurance or disability insurance.  Opting for insurance coverage helps ensure that the party receiving support will receive the resources to which they’re entitled, with a minimum of legal and administrative hassle.
  • Tip 6:  Be aware of all assets of the marriage.  For most folks, divorce is the biggest financial transaction in their lives.  It’s so important to fully understand the assets of the marriage and each party.  In Washington, the law of separate and community property can color divorce outcomes; unless you’re a family law attorney, you likely haven’t analyzed your estate along those lines.
  • Tip 7:  Be mindful of how you will ensure that your health care needs are covered, and also determine what that will cost.
  • Tip 8:  Minimize the debt that you’ll divide in the divorce.  If you need to carry debt forward, have each party “take” their separate portion of the debt and put it into a new account in that person’s name alone.  This will reduce future headaches that can arise if a creditor tries to collect on a portion of community debt that should be the responsibility of the other spouse.
Divorce/Estate/Financial Planning/Legal Separation/Divorce/Marriage/Money

What’s Yours is Yours

One of the things that I find (incredibly) nerdily interesting about my work is the concept of the character of property.  In Washington, most property is either separate property or community property.  (I’ll spare you the “quasi-community” property and the legal nuances that arise when parties move to/from a community property state from another state.)

Legally, there’s a presumption that what you acquired before marriage (either as an asset or debt) is your separate property or obligation.  When you marry, or in certain cohabitation circumstances, the legal presumption changes and the law begins to think of folks as a financial team.  Property that’s acquired is assumed to be community property; debt that’s acquired is presumed to be community debt; and the name that something is in is not the “last word” as to the character of the property.  These ideas, “Community Property 101”, if you will are key concepts for my pre-nuptial, divorce, and estate planning clients, as the character of property determines where the financial focus is in a divorce and what you have control to give away in a will.

A line I’ll often throw out is this:  “What’s mine is yours” is the opposite of the concept of separate property.  If it’s “mine”–my separate property–then it’s likely going to stay mine unless there’s a clear indication that I wanted to change that.  While “what’s mine is yours” may be a romantic notion, it’s not how the law sees it.

To that end, I thought that this piece on CNN Money was both clear and helpful.  The piece is primarily a response to the question of “if I marry my boyfriend [will] his student loan debt [become] mine too”?  The short answer is “No”.  Debt acquired before marriage?  That’s separate debt.  The longer answer is very thoughtful, though, as there will be impacts on the marital community from the existence of the debt.  In other words, while the debt is a separate debt, they’ll share its impact.

Legal Separation/Divorce

Better Ways to Divorce

Just over a year ago, my husband and I were shopping for a car that would be a better fit for our expanded family.  A salesman at the dealership heard of our interest in a model with a particular set of features and he exclaimed “Ah! A Unicorn!”.  In other words, it was more common to hear about the combination we were looking for than to see it.

In my work as a divorce attorney, I sometimes get the sense that the idea of a divorce that’s not thoroughly rotten seems as elusive as a unicorn.  For that reason, I was happy to see this article in the October 2014 issue of Women’s Health.  The take home lesson?  Divorce/separation does not have to be ugly.

Based on my practice, I think the piece is one of the rare portrayals of divorce in popular literature that’s pretty darn accurate.  It acknowledges that amicable divorce is not easy and that communication is critical.  It points out the benefits and identifies some of the changes both parties must make when relating to each other.  And, it raises the idea of the value of hiring objective (non-adversarial) counsel to help you get the agreements you need; knowing that a divorce is often the biggest financial deal that a person will make, it’s smart to get input from someone who knows the ropes.

As Faye Brennan, the author of the piece points out, there are marriages where an amicable divorce is unlikely or may be inappropriate.  Brennan cites situations of cheating, lying, neglect, or betrayal.  To her list, I’d add situations of abuse.

One caution I have to offer is to not simply pursue the an amicable divorce “for the money”.  Certainly, it’s great to be able to save money in a divorce process, already a costly shift as you go from one household to two.  That said, it’s important to be mindful of the trade-offs that you make in a divorce and ensure that your bottom-line needs are met, both financial needs and others.

If you’re curious to learn more about the “Conscious Uncoupling” method highlighted in the piece, it turns out the pioneer of that approach is offering a free online class later this month.  Here’s where you can check it out:  http://evolvingwisdom.com/consciousuncoupling/free-online-class/.

 

Estate/Financial Planning/Legal Separation/Divorce/Money

Change, and Willpower

My latest “read”–an audio book, actually–has been “Willpower” by Roy F. Baumeister.  Published in 2011, it’s a book about the science behind controlling yourself.

I’ve taken two of Baumeister’s lessons to heart, and passed them on to clients.  Namely, (1) we humans have a limited supply of willpower, and (2) we draw on the same supply for everything we do.  This was interesting but not great news for me, as it sounds like it’s going to be a tall order to get keep myself on track for marathon training, to increase the frequency of my financial tracking (see this post for why), and to try to cut the coffee shop scones from my diet.  It was also an “aha!” moment, as it explained why the self-improvement symphonies I’d composed in college never worked, and why a single-minded focus on getting to law school graduation did work.

One of the things that I like about the work that I do is that nearly all of my clients are changing some aspect of their lives.  Pre-nuptial clients are getting married.  Other clients are divorcing.  Financial coaching clients are sick of having debt and/or not knowing where their money goes.  For all of these clients, though, this book suggests that there are limitations around the willpower we have for change, in addition to the more apparent limitations of time and resources.

So, I invite you to be conscious of how you are using your willpower.  If you truly want to see change in one area of your life, delay making changes in other areas.

Divorce/Estate/Financial Planning/Legal Separation/Divorce/Money

Decide What Your Stuff is Worth

This excerpt on Slate.com offers a “Minimalist” perspective on some of the hidden costs of our belongings.  I’m not siding one way or the other in the stuff debate, rather I’m recognizing that–as is true for everything–being mindful of our acquisitions is critical.

As kids, we learn that it costs money to buy something.  It’s as we get older that we recognize it also costs time, energy, and money to maintain it.  Having a car is great, until you have to wash it.  Having a backyard is great, until you have to weed it.  Having a house is great, until you have to replace the water heater.  As Joshua Fields Millburn writes:  “No matter how organized we are, we must continue to care for the stuff we organize, sorting and cleaning our meticulously structured belongings.”

In my work, I see the financial challenges that folks face to get and maintain their stuff.  I also see the choices they have to make during tough times such as divorce or death.  Like many professionals who work with divorcing couples, I have seen what happens when anger, fear, and disappointment converge and a normal object’s importance far surpasses its market value.  The emotions of the divorce distort the client’s sense of worth so that it seems fighting over that object is a good use of their time, energy, and money.  I suspect that if these clients’ wiser selves could talk to them, they’d advise saving money and skipping the battle.

Will contests happen when heirs are unhappy with how a relation’s estate passed.  To some extent, estate planning in Washington is simplified by the fact that a testator (person making a will) can create their own, separate, written instructions as to the disposition of tangible personal property.  Nevertheless, at death, your choices about what things felt deserved your time, energy, and money will directly impact the person or persons who administer your estate.  

For myself, I’d say that I’m a “sufficient-ist”.  I need stuff; stuff helps comfort and entertain.  And I want my stuff to be worth the time, energy, and money that it takes to maintain it.  

 

Estate/Financial Planning/Legal Separation/Divorce/Money

Persuading Yourself

Full disclosure:  I like the way that Dan Pink thinks and I like the way he writes.  “Free Agent Nation” captured my imagination a decade ago, “The Adventures of Johnny Bunko” cheered me up during a tough career patch, and now “To Sell is Human” has given me some excellent food for thought in terms of persuading others…and myself.

Pink acknowledges that “we human beings are notoriously bad at wrapping our minds around far-off events.  Our biases point us toward the present.”  This is a big hindrance in decision-making, whether it’s about deciding to go ahead with estate planning, to finally get in control of finances, or make other big life shifts.  In a series of experiments, Hal Hershfield, a social psychologist at New York University, worked with colleagues to study the decisions that research participants made regarding retirement savings.

After these experiments, Hershfield concluded that participants who saw aged images of themselves–not just any “old” person, but themselves–always saved more.  The insight?  In Pink’s words, “we think of ourselves today and ourselves in the future as different people.”  It’s amazing that this seems to happen so consistently, and we don’t even notice it!

Since reading this, I’ve really enjoyed framing decision in terms of whether I’d be satisfied with the outcome if it were to happen right now.  Would my current “me”, with all my reasonable needs and irrational desires, like the reality the decision would create?  If the answer is “no”, then it’s time to make a different decision.  Can you think of how this might help you persuade yourself?

 

Legal Separation/Divorce/Money

Post-Divorce Taxes

While the filing deadline for Federal income taxes passed a few days ago, this piece on Time.com offers tips on some issues that often come up for divorced folks.  One highlight:  In certain instances, married-but-divorcing folks can file as “head of household”.  Happy reading…and be sure to consult a tax professional for tax advice.

Estate/Financial Planning/Legal Separation/Divorce/Self-employed

Your IRA in a Divorce

This “Tax Talk” question on the Yahoo Finance site does a pretty good job summing up important information on dividing an IRA (“individual retirement account”) in a divorce.  This is sometimes a tricky topic for clients.

In a divorce, the first issue is what is legally-appropriate division of the retirement account, if any.  Sometimes it’s preferable for a divorcing person to keep the entire balance of a retirement account and for their spouse to receive other assets to create an equitable settlement.

If you do decide to divide a retirement account, the process to divide it differs depending on what kind of account it is.  Some divisions can be accomplished simply by stating what each person gets in the final decree and then notifying the account holder; for some accounts, like a 401(k) account or a pension plan, you will likely need a court order to divide the account.  This is one of those things that it’s worth discussing with an attorney because there are some seemingly small details in those orders that can make a big difference!