Divorce — Planning Ahead or Just Reacting?

health-care costsToday we welcome Guest Poster Jared Diamond. He’s not from New Mexico, so please understand he’s writing generally; he’s also not a lawyer. But the points he makes are good to consider. I have some additional thoughts that I’ll add next week.

Divorce: A Reactive or Proactive Animal?

Divorce and poverty often go together like Laurel and Hardy, but some forward-thinking financial planning can help you avoid that pitfall. Most people are well aware of the short-term and obvious financial consequences of divorce, but there are some long-term and hidden consequences as well.

Some attorneys give reactive advice – “if X happens, react by doing Y” – and that works very well in many situations: divorce can be so overwhelming that many attorneys do not want to overburden their clients with excess information. Others, such as Austin based divorce attorney Jim Evans have more success with a proactive approach – “proactively do Y to prevent X from occurring in the first place.”  For attorneys in the proactive school, financial planning for the future starts while the divorce is still ongoing.

Conserving resources

Because mediation is a good option to reduce direct and short-term legal expenses, many attorneys recommend mediation based on the short-term benefits alone. Proactive mediation also has long-term cost benefits: by increasing satisfaction with the outcome, mediation increases compliance and decreases future legal expenses on motions to enforce and other procedures. Because mediation has other benefits, such as decreased conflict and decreased stress, you are more productive and get more done at work and at home, and you take fewer sick days to deal with the emotional stresses and strains of divorce.

Mediation is not always successful, but it is nearly always at least worth a try.

Planning ahead

The reactive school says to get the best deal possible upfront, and deal with any longer-term financial difficulties if and when they arise. Part of the issue may be that some attorneys are not really interested in a long-term relationship with their clients, so there is a tendency to say “look at the favorable divorce property settlement I obtained for you; call someone else if something goes wrong later.”

Even the most basic financial planner knows that what is good today may not be good tomorrow and, in fact, sometimes it may be worth sacrificing a little bit today in order to have a better tomorrow. NPV (No Present Value) assets in a divorce are a prime example: home equity, stock options and retirement accounts to name a few. But these NPV assets are not magic beans that may be worthless; these NPV assets are very valuable in the future.

Home equity is a gold mine once the house is sold, or if the homeowner elects to take out a reverse mortgage later. Stock options may mature into very lucrative assets that can jump start a retirement or a child’s college education. And your share of a retirement account can help give you the financial security you deserve.

While the reactive school may be best in some situations (why bother formulating solutions to problems that may never be an issue?), a proactive divorce attorney is the best advocate for your family, both now and ten years from now.

Jared Diamond writes on a host of personal finance topics. Jared is a graduate of the Ohio State University with a B.A. in Economics and is an active blogger on a number of publications.

Divorce Series: 50 Ways How Not To Leave Your Lover: #3 — HandlingConflict.com

This is part of on ongoing series critiquing a book out there called “Divorce War!” I write more about the series on the page called “Divorce War DON’TS”. The book lists 50 strategies. Some are legitimate and some are not and these are potentially or actually unethical or criminal. I’m reviewing all 50 strategies with a “don’t” perspective, with a new post from time to time.

DON’T#3. Hire the toughest, best-liked, and most highly connected lawyer money can buy.

Believe it or not, the writer means “most highly connected” with the divorce judges:

Does he or she have a relationship on a first-name basis with the judge? Do they play golf, tennis, or otherwise socialize together? The stronger the relationship, the better off you are with the lawyer. It’s not always what you know, but who you know. In legal societies, the “good old boy” system still exists pretty much as it did a century ago.

This is insulting to the judiciary, and in its own way naive, or worse, lazy, which translates into potentially dangerous for you. Continue reading

Divorce Series: 50 Ways How NOT To Leave Your Lover: #2 — HandlingConflict.com

This is part of on ongoing series critiquing a book out there called “Divorce War!” I write more about the series on the page called “Divorce War DON’TS”. The book lists 50 strategies. Some are legitimate and some are not and these are potentially or actually unethical or criminal. I’m reviewing all 50 strategies with a “don’t” perspective.

DON’T#2. Never trust that your husband has provided you with full or accurate information about his assets and financial situation.

Really? You certainly trusted this person once enough to choose to marry!

If you are considering divorce you are likely in a state of great stress, and you probably want to be careful about your assumptions as well as your actions. It’s hard to think straight under duress, and you might make some bad choices. Divorce happens between good and honest people, too! What, if anything, gives you cause, when you pause, to think that your spouse might have been or is lying to you? If you have grounds for distrust, do consider what if anything you need to do because of that. But without having grounds for disbelief, be careful about demonizing your spouse, especially if you have children. Continue reading