One conversation I find myself having a lot with potential clients lately is about the ground rules of their divorce negotiation. Specifically, I warn them that if they don’t agree on these ground rules when they begin negotiating their divorce settlement, then they will likely run into problems that will increase the time and expense of their divorce but do nothing to help resolve the legal issues.
We have ground rules for almost every kind of conversation in our lives. That is, we have a set of expectations about how that conversation will go. We have expectations about who will be involved, what can be said, how it can be said, when the conversation will happen, and almost every other facet of the conversation. And, when those mores are violated we are frequently offended. People who violate these conversations mores seem to us to be rude, selfish, obnoxious, dishonest, hurtful, and otherwise offensive.
We don’t have to think very hard to find a conversation or interaction in our recent past in which the other person violated some expectation or ground rule about how that conversation should have gone that offended us.
The conversations you have about how you will settle your divorce issues are perhaps the most emotionally charged, complex, and important of your life (and maybe the lives of your children). This means that the ground rules of your divorce negotiation become crucial to productive negotiation.
I frequently speak with prospective clients who are suffering frustration, anxiety, fear, or confusion because they have already begun some discussions with their spouse about their divorce settlement, but have not agreed on the ground rules in advance.
This often occurs in one of the following scenarios:
- One spouse presents the other with a “settlement offer”, “demand”, or “proposal” out of the blue
- One spouse hires an attorney without notifying the other in advance or simply utters the word “lawyer” early on
- One party takes a leveraged, adversarial stance right off of the bat
- One party assumes that they need to leave themselves “room to move” in the negotiation and presents an unreasonable “offer” early on
- One spouse starts talking in terms of what they or their spouse “deserves”, “is entitled to”, “should get”, or what they will and will not do.
- One spouse begins talking about “what the law says”
When this happens, the discussion is already headed down an unproductive path, and things will only get worse if there is not a discussion of the ground rules of the negotiation.
The problem is that each spouse typically enters the discussion (and the entire idea of divorce) with significantly different, but unspoken, ideas about how they are going to negotiate. One spouse may be very direct and positional, while the other is reticent and geared toward consensus building. One spouse may expect that they are going to move quickly while the other expects them to take their time in making important decisions. One may feel that lobbing offers and counteroffers at each other through attorneys is best, while the other expects to have a joint problem-solving approach.
These different expectations can derail your negotiation before it can even start. I frequently see spouses that scare each other so badly early on by violating these expectations that they end up in unnecessarily combative and expensive divorces.
Unfortunately, this also happens between lawyers. There is a lot of squabbling (and resulting legal fees) when one lawyer feels that the other has violated some expected ground rule in a case. Discovery motions and objections are almost always a result of this kind of squabbling.
The solution that I give these families is that they need to agree on the ground rules before they begin discussing the substantive issues in their case (e.g. custody, child support, alimony, equitable distribution). If you are not careful someone else, such as a judge or your attorney, will choose your ground rules for you.
Each kind of legal process has its own ground rules. Litigation ground rules are found in the Rules of Civil Procedure, Rules of Evidence, and Local Court Rules. Mediation and arbitration rules are also set out in the law. Attorney to attorney negotiation has some informal and unspoken rules, but they are not universal and are frequently the fodder for attorney spats.
In my experience, Collaborative Divorce has the most client-friendly, productive, and efficient ground rules of any divorce negotiation process. By signing a Collaborative Law Agreement, the parties and the attorneys are agreeing to play by these ground rules during the negotiation. These ground rules are designed to promote honesty, information sharing, respect, productivity, and efficiency.
Regardless of the process you choose, the conversation about ground rules needs to happen very early in order to be effective. So, if you are facing divorce, give some thought to what ground rules you would like to have in your discussions. Discuss those with your spouse. Hopefully, you and your spouse will be able to agree on the basic ground rules early, so that you don’t violate each other’s expectations. That way, you can spend your time and money addressing the substantive issues in your case and your actual solutions, and spend less time and money arguing over the negotiation rules.
In my last post, I set out 10 basic facts about retirement accounts in divorce in North Carolina.
One of those tips mentioned the taxes and penalties that are incurred upon an early withdrawal of retirement funds. This article from Kiplingers details exactly how this came back to bite one divorcing teacher.
Needless to say withdrawing funds from a 401k or other retirement vehicle needs to be handled very carefully, and with the advice of an attorney or financial professional, if not both. As the article states, there are frequently alternative means of obtaining needed liquid funds that have less drastic consequences.
Ideally, you and your spouse can agree to discuss the division use of retirement funds in a joint problem solving legal process that takes into account your individual goals and needs.
But, even if your divorce becomes combative, and you need funds from your retirement account to pay legal fees or living expenses, proceed with extreme caution and explore your options before raiding a retirement account.
One item that people frequently worry about most when they find out they are getting divorced is their 401k. The prospect of sharing their retirement savings, whether in a 401k, IRA, pension, or other retirement accounts can cause a lot of anxiety. I have always found that the best way to alleviate anxiety in divorce is with accurate information. So, here are some basics of what you can expect regarding your 401k if you are getting divorced.
- At least in North Carolina, only the marital portion of the retirement account can be divvied up by a court. Typically, that is the portion of the account that accrued between the date of marriage and date of separation.
- Many, if not most retirement accounts can only be divided by way of a special court order called a “Domestic Relations Order”.
- Dividing retirement accounts without a court order or a properly drafted and executed separation agreement can result in expensive penalties and taxation on the withdrawals to the account owner.
- Most 401k companies will not allow you to give your spouse specific parts, shares, or assets of a 401k. For example, it is usually impossible to give your spouse just the Apple stock out of your 401k.
- There are big differences between Roth and non-Roth retirement accounts in taxation when the funds are withdrawn later.
- Some retirement accounts can be divided such that your spouse gets their own separate account. But, some can only be divided such that your spouse gets a portion of your payment once you start receiving benefits.
- Annuities are difficult to divide and therefore payments from the annuities may need to be shared or divided when the payments begin.
- When dividing pensions, there are important and tricky survivor benefits that need to be considered and addressed.
- Some retirement plans have online services for researching and drafting domestic relations orders to divide the accounts.
- The “coverture fraction” or “marital coverture fraction” is the most common technique for determining what part of a “defined benefit” (e.g. pension) plan can be divided. This is the fraction representing the years of the marriage during which you earned the benefit, divided by the total years you earned the benefit. If you earned the entire benefit while you were married, then the fraction is 1/1. If you were not married for the entire time you earned the benefit, then the fraction will be less than 1.
Dealing with retirement accounts in divorce can be complicated and the details of each plan and case are important. But understanding some of the basics can help reduce anxiety in the early stages. Optimizing retirement outcomes for both parties in divorce is best done in a joint problem solving divorce process where all of the options can be discussed.
One of the core tenets of my practice is that people need to be very thoughtful and very intentional about how they are going to go through the divorce process. If they don’t want a big nasty fight, then they need to take the steps necessary to avoid a big nasty fight. If they want to fight, so be it; that can be a valid choice. But that needs to be an intentional choice, not something you fall in to.
The point is that you don’t want to fall into a certain kind of divorce by accident. You want the tone, tenor, and structure of your divorce process to be the one you and your spouse choose, not the default process of your attorneys.
But to do that you have to start with the end in mind. What kind of relationship do you want to have with your spouse down the road? What kind of relationship do you want to have with your kids down the road? What kind of relationship do you want your kids to have with the other parent? Do you want to stress your kids out when they are planning their wedding because you and your ex never healed? Do you want to lose out on time with your kids and grandkids because they have to divide their family time between divorced parents who can’t be in the same place? Do you prefer to fund your children’s college or your attorney’s children’s college?
I think these are the concepts that the divorce attorney to the stars, Laura Wasser, is touching on in her recent interview about the new movie Marriage Story.
In discussing a character’s super aggressive divorce attorney she says “If you don’t want to end up like these people, and have somebody like this representing your spouse, you ought to really think carefully about how you embark upon the road to divorce.”
She goes on to describe the trend of divorcing couples finding more peaceful and reasonable ways to get through their divorce: “I definitely think that, in the last five to ten years particularly, we have seen a shift in terms of more divorcing parties going to mediation, communicating more effectively…joining communities, reading things, getting educated about the process”.
Part of the reason for that is the fading of the misconception that aggressive and attacking behavior helps a client’s cause. She says she doesn’t recommend clients “…exercising bad behavior as a way to get ahead. I don’t think judicial officers find that to be something that’s worthy of being rewarded.”
Laura Wasser is just one attorney but she’s an attorney who deals in many cases where privacy is paramount, there are big financial issues at stake, and emotions run high. If she is telling her clients to be very thoughtful about their divorce process and to keep the end result in mind when choosing a process, then perhaps that’s good advice for everyone else.
The cost of divorce is top of mind for almost every client that I serve. In my experience the amount of income and net worth have very little impact on how much someone worries about this issue.
The reality is that many divorces involve complex emotional, financial, and legal issues and therefore take some time to problem solve to resolution. So, it is very important that clients get as much value from what they pay for their divorce process as possible.
One of the best ways that attorneys can add value to a client’s use of resources on their divorce is to help them avoid future expenditures on legal issues. When I was litigating adversarial family law cases in court, clients almost always grossly underestimated the amount that they would spend in the years after their first round of court hearings. This was because the adversarial nature of the court process planted seeds of anger, resentment, distrust, and vindictiveness that I knew would sprout into fields of future conflict. And, this future conflict often costs multiples of the amount spent in the initial round of conflict.
The best way to prevent this, in my experience, is to resolve the first round of conflict in a way that prevents, or at least greatly reduces the likelihood of future adversarial conflict that would require legal fees. That is essentially the main goal of Collaborative Law.
While this is a core tenet of my practice, it came to mind most recently while reading a study on shared parenting which stated:
“Shared custody – like any other parenting arrangement – can work well or poorly depending on a range of factors. Moreover…life changes may eventually present new challenges, and helping parents understand and be more prepared for future issues that would need to be addressed if they are to continue sharing parenting could prevent future difficulties.” The Growth in Shared Custody in the United States: Patterns and Implications, Meyer, D, Cancian, M., and Cook, S. Family Court Review, V. 55, No. 4, October 2017
I have previously discussed the difference between answers and solutions in legal matters. Answers give you an immediate instruction of what you will do now. Solutions give you not only an immediate answer, but a plan and process for handling the “future issues” that invariably come up for families after their separation agreement is signed.
In a collaborative divorce, communication patterns are identified, modified to be more productive, and new communication and conflict resolution skills are learned. These underlying issues are rarely addressed in a court proceeding or traditional negotiation. So, while courts can give families an immediate answer, they are far less able to provide the tools and solutions that will help avoid future legal fees.
The aim is that, when future issues arise, the parties feel competent and confident in finding their own solution instead of calling an attorney to re-ignite the adversarial process. If that doesn’t work, they can enlist their collaborative attorneys, financial neutral, or child specialist to help them over a rough spot without falling into the endless pattern of litigation or incurring high legal fees. Those fees saved are the same as extra money earned.
As the saying goes, the only constant is change. Changes will happen after your separation agreement is signed and your divorce is finalized. In order to get the most value from your time and money spent, choose a process that will help both of you handle future issues more productively down the road so that you won’t need to involve courts or attorneys for the “future issues”.
One of the biggest financial hits that can come with divorce is the cost of health insurance for an unemployed spouse. Typically, the unemployed or part-time employed spouse is covered under the health insurance plan offered by the other spouse’s job.
In my practice, I typically see premiums for private policies (policies not provided through an employer) between $500 and $800 per month depending on the plan. This cost can vary greatly and can be reduced to almost nothing if certain government subsidies are triggered by the Affordable Care Act (“Obamacare”).
But, in most cases, a family is looking at a substantial additional expense to cover a spouse with no employer-sponsored health insurance.
So, it typically makes sense for a spouse to stay on the other spouse’s employer-sponsored health insurance for as long as possible to save money.
The question then, is how long can one spouse stay on the other’s health insurance? The answer in North Carolina in the vast majority of cases is until the date of divorce.
There may be language in documentation from Human Resources or in the benefits package documentation that mentions “legal separation”. This language sometimes requires the employee to report a “legal separation” to HR so that benefit eligibility for the spouse can be re-evaluated.
This is where the difference between “legal separation” and “legally separated” comes in. A “legal separation” is a specific legal order by a court that is offered in some states, but not North Carolina. The closest thing North Carolina has to a “legal separation” is called “Divorce from Bed and Board”, or a “DBB”. A DBB has to be obtained from a court in North Carolina. You have to put a lot of time, effort, and legal fees into a DBB. So you will know if you have a DBB.
In North Carolina, “legally separated” is much different than a “legal separation” in some other states. “Legally Separated” in North Carolina means that you are living under separate roofs with the intent for that separation to remain permanent (i.e. not a limited “trial separation”). Being “legally separated” in North Carolina is not a “legal separation” as that term is used in other states. “Legally separated” in this state means essentially that the one-year waiting period for divorce has begun and that some financial issues related to divorce have kicked in (there are other legal impacts of being legally separated, ask a lawyer for a full explanation).
So, if you are separating, or legally separated in North Carolina, you typically do not need to report that separation to an employer-sponsored health plan. And, both spouses can remain on the employer policy until the actual date of the divorce.
That being said, every situation is different, so contact an attorney to determine whether and how being legally separated impacts you or your spouse’s eligibility for employer-sponsored health insurance.
My last post talked about one of the highly valuable services that I, or any skilled and experienced collaborative attorney, provide to a client; namely, helping them understand the conceptual agreements they reach at the kitchen table.
I want to cover another of the highest value services that I provide to clients in a collaborative process: Preventing old relational dynamics from undermining a settlement.
It has been said that the definition of insanity is doing the same thing over and over while expecting a different result. While it is a bit simplistic, it highlights the idea that if a dynamic has not worked in the past, then it is unlikely to work in the present or future.
Every couple has established relational dynamics. This includes the way they speak to each other, interpret each other’s statements, assumptions they make about each other, and expectations they have for each other’s behavior, among others. However, from my perspective, the most important relational dynamic in divorce is the way a couple handles conflict with each other.
Some couples simply don’t talk about conflicts. Some confront it immediately, head-on, with volume. Sometimes one person wants to confront it head-on and the other wants to avoid it and hope it goes away. There are almost as many dynamics for handling conflict as there are couples. Some are quite helpful and productive, but many are counterproductive.
It is often true that the way a couple handled conflict during the marriage played a significant role in the breakdown of the marriage. And yet, couples frequently want to conduct their divorce negotiation using the same dynamics that got them to the divorce.
It makes sense; these dynamics are deeply rooted and highly ingrained. They are very difficult to escape because they feel “natural” and even, ironically, comfortable in some ways.
And yet these dynamics can and do torpedo rational settlement conversations before they have a chance to gain traction. Even if they don’t prevent a settlement they unnecessarily prolong the negotiations and multiply the costs of the divorce if not managed effectively.
Fortunately, there are attorneys specifically trained to help clients manage these dynamics. Collaborative attorneys have unique skills to identify counterproductive dynamics and then mitigate them so clients don’t spend unnecessary time and expense getting hung up in old patterns.
These techniques start with training in how to listen to clients and their spouses. Once a pattern presents itself collaborative attorneys can help short circuit the pattern and adopt a new dynamic before frustration, deadlock, and the dreaded “Battle of Wills” set in.
This ability to identify and mitigate counterproductive dynamics between divorcing spouses is perhaps the key to the effectiveness of the Collaborative Divorce process. Having skilled attorneys who can see the dynamic objectively and short circuit it saves precious time and money for clients.
Without attorneys that can do this, the old dynamics lead to increased anger, frustration, suspicion, and mushroom-cloud conflict. That, in turn, leads to skyrocketing legal fees, animosity, and delays.
While it may be hard to see from the inside, the conflict dynamics that you and your spouse have used in the past may not serve you well in your divorce. Understanding that and hiring an attorney that is trained to identify and handle those dynamics will save you untold time and money.
Some couples can have productive conversations at the kitchen table and agree on how they want to handle the financial and co-parenting issues of their separation and divorce. And I am all for couples having these conversations as long as they are productive. I believe that the more couples are able to sort out on their own, the better for them, their families, our court system, and society in general.
These couples understandably wonder why they need an attorney if they can figure things out on their own. It is a reasonable question.
There are many reasons, but I want to focus on one in this post: the difference between what you think you have agreed to, and what you have actually agreed to.
This came to mind while reading a blog post from a financial planner about pension divisions (I know, this sounds insanely boring).
This blog points out that “Even in amicable separations, and situations in which spouses largely agree conceptually on how assets should be divided, it’s not uncommon for there to be an innocent misunderstanding at the time that, once more thoroughly understood in the future, creates animosity or financial hardship. And, in some cases, both.”
The author frames this situation as the “We agree, but don’t really understand what we’ve just agreed upon” scenario.
This is a very real risk. Clients (both collaborative divorce clients and non-collaborative divorce clients) frequently come to me with at least a partial outline of some agreed big-picture terms. However, part of my job is to dig into the details of those agreements because I am responsible for taking these conceptual agreements and turning them into fleshed-out enforceable legal agreements. And once I start asking about details, and explaining the consequences of the conceptual agreements, clients frequently realize that they did not actually understand what they were agreeing to do.
In my mind, one of the most valuable services I provide to clients is helping them to truly understand their conceptual agreements, and to help them tweak them where necessary to reach a full and detailed agreement that is legally enforceable.
Some clients are frustrated to learn that there is more work to be done and that their conceptual agreements are not the end of the journey. I certainly understand that. After all, even the conceptual agreements take energy and those conversations can be emotionally draining. It is just one of the frustrating parts of separation and divorce.
But, without that work, the innocent misunderstandings that come with conceptual agreements become the seeds of the animosity and financial hardship that everyone is trying to avoid.
So, to answer the question “We know what we want to do. Why do we need lawyers?”: The answer is that a good lawyer is there to help you truly understand what you have agreed to conceptually and find and address the innocent misunderstandings before they create animosity and financial hardship down the road.
One of the most common points of confusion in my first conversations with clients is helping them understand what constitutes a legal separation in North Carolina.
The legal definition of what it means to be “separated” is different from state to state. So it is crucial to understand what it takes in your state, in my case, North Carolina.
The problem is that the definition is murky. It is easy to know whether someone is legally separated on the ends of the spectrum, but difficult to determine whether that is true for couples somewhere in the middle. Essentially, a couple is legally separated in North Carolina if they are living under separate roofs with the intent (only one spouse need have this intent) for that separation to be permanent. If a couple is living in the same house, then they are clearly not legally separated. If a couple is living in separate homes on different lots with the intention of beginning the 365 day waiting period, then they are physically separated. That sounds simple enough. But what about everything in between?
What is a roof? Which roofs count? How far away does that roof have to be? What if intent for things to be permanent changes over time? When does a trial separation become a permanent separation to start the 365 day clock for a divorce? Do you have to tell everybody that you’re separated? Is some announcement necessary?
And, there is another pesky little aspect that comes into play that is hard to nail down. Roughly speaking the couple can’t seem to be married in the eyes of other people. Or, as the Court of Appeals put it:
“Separation, as this word is used in the divorce statutes, implies living apart for the entire period in such manner that those who come in contact with them may see that the husband and wife are not living together. For the purpose of obtaining a divorce under . . . G.S. § 50-6, separation may not be predicated upon evidence which shows that during the period the parties have held themselves out as husband and wife living together, nor when the association between them has been of such character as to induce others who observe them to regard them as living together in the ordinary acceptation of that descriptive phrase.” Young v. Young, 225 N.C. at 344, 34 S.E.2d at 157. Tuttle v. Tuttle, 36 N.C.App. 635, 244 S.E.2d 447 (N.C. App., 1978)
That last sentence says a lot without clarifying much. But, I interpret it to mean that the separation has to give outside observers the clear indication that the spouses are no longer living together.
There are infinite permutations of a legal separation and many lie somewhere between the obvious ends of the spectrum. So, it often takes an attorney to determine whether a couple has been legally separated for the mandated period in North Carolina and are therefore eligible for a divorce.
If you’re not sure whether your plans to separate or your current separation qualify as a legal separation in North Carolina, call an experienced family law attorney to help you sort it out.
I noticed recently that one of the most common Google searches in the divorce realm is for online separation agreements. Most divorce attorneys don’t need Google to tell them that many clients are looking for faster and cheaper ways to get through the divorce process. They answer calls and emails every day telling them as much.
Online separation agreements are a seemingly obvious way to get what you need without the time and expenses of an attorney. Why pay a lawyer to write words on paper when the internet will give it to you for very little cost or even free?
Well, it turns out there are some good reasons. The online agreement forms that I have seen and have reviewed for clients typically have many holes, and frequently include terms that would not be advised by an attorney. They suffer from both over and under inclusion.
Here are three of the more common and problematic issues that I see:
- Life insurance: Many if not all of the online forms I have seen leave out any mention of life insurance. Life insurance terms are commonly used in North Carolina to secure long term payments of child custody and spousal support. These missing terms leave spouses receiving support payments vulnerable.
- Filing or recordation of the Separation Agreement: Many online agreements include language that contemplates the agreement being filed with the court or recorded with a register of deeds. However, at least in North Carolina, filing an agreement with the court and/or recording it has serious consequences that clients don’t foresee and don’t realize will have serious implications in their case. It might be appropriate in a case, but that needs to be discussed with an attorney to make sure you are making an educated decision about this issue.
- Approval by Court: Similar to the filing of an agreement issue, many of these online agreement forms contemplate a court needing to approve or review the agreement. North Carolina law is different than many other states in this regard and many online forms do not track North Carolina law.
- Overly general language: There are some issues under North Carolina law where very specific language is required. These online forms rarely focus on individual state law and therefore frequently omit the more particular language.
These issues do not necessarily make online forms unusable or worthless. These forms can be useful to help people identify many of the issues and details that they will need to figure out to reach a comprehensive separation agreement. They often serve as a useful guide for the initial framework for couples that want to begin the conversation at the kitchen table. And productive conversations between divorcing spouses are the very best way to save money with attorneys; the more clients can figure out on their own, the less they pay attorneys to figure out for them.
However, the holes and problems with many online forms make them risky for use without review by an attorney to identify and fix the problems before they are formalized.