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Collaborative Divorce for High Net-Worth Families

There are some divorces in which you are able to settle all of the issues quickly and easily, often without attorneys. There are Florida Supreme Court approved forms online with many of the forms you need to complete a divorce, including a form marital settlement agreement, parenting plan, and divorce petitions.

In cases where there are disagreements, the disputes can center around children’s issues, financial issues and often both. I believe a process called collaborative law or collaborative divorce is clearly better to resolve children’s issues where possible, versus engaging in a “custody battle” in court – which can be an unpleasant, hostile and destructive process for both the parents and children.

I believe the collaborative process is far superior for resolving financial issues as well, especially for high net-worth or high asset value cases.

One of the benefits arises from using one neutral financial professional, usually a forensic accountant, to analyze the financial issues in the case – assets, debts, income and expenses; versus the time and expense of each party’s retaining separate accountants, with dueling reports and expert opinions offered to the Court.

The neutral forensic accountant can look into issues like the income and expenses of a business, each party’s expenses and financial needs, and the value of assets.

Often in divorce cases when there are significant valuation issues — for example valuing businesses, separate valuation experts will be retained in addition to forensic accountants. This can be true in collaborative cases as well, although many of the collaborative law financial neutrals have training in business valuations, and can value a business if you both and your collaborative attorneys want to go that route, versus hiring a business valuation expert, in addition to the financial neutral.

Whether it’s the financial neutral preforming the valuation, or a separate business valuation expert, the process in collaborative law can in my opinion be superior to the process in a litigated case. You can both meet with the valuation person to understand how the valuation is going to be done and the assumptions and approach to be used in the valuation, to hopefully help you both feel confident in the result.

There are some circumstance in which you may want your own, separate valuation expert to dig into the facts of the case and the business or businesses involved and arrive at a valuation with which you are comfortable. That can be addressed as part of the process in a collaborative case.

In litigation, if there is disagreement regarding financial issues you then proceed to disputing, either between the attorneys or at trial, who is right. Needless to say, trials are very expensive. In a high net-worth, contested divorce, where there are significant financial issues in dispute, a trial is a significant event, involving multiple days of testimony and evidence, and more days in advance in preparation by both you, the attorney and experts.

In a collaborative divorce, the issues are resolved around a table. While each case is different, and an attorney can almost never guarantee a result, the reported success rates for collaborative cases are high, in the 90% range. If you follow this last link, there is also a summary of and a link to reports of costs for collaborative cases, which are significantly less than for contested litigation matters, especially in my opinion for high asset cases in which litigation expenses can easily run well in excess of $100,000 for each party, including attorneys, accountants and valuation experts.

One of the additional factors which drives costs in litigation cases is the expense of formal discovery, which can involve production of many thousands of pages of documents, often multiple objections to discovery, and back and forth correspondence, argument, and hearings to resolve the objections. In a collaborative case, you’ll have the one financial neutral initially compiling and reviewing statements, accounts and arriving at schedules of income, expenses, assets and liabilities.

Your collaborative attorney will still review these schedules, but the level of review of the original source materials – statements, etc. can often be less, because you are both hiring the financial neutral to do this work.  In a litigated case, your attorney will need to be prepared, for example, to cross-examine the other spouse’s expert regarding his or her opinions, e.g. regarding the income and expenses of a business, or value of the business. There are basically just additional costs when you are preparing for an adversarial process.

A trial or hearing is a specific day when significant issues are decided for your life.  There are still the possibilities of appeals, motions for re-hearing and other types of relief, but the need to be prepared for in some ways an all or nothing event drives additional costs, versus the ongoing process of collaborative divorce, in which both parties in writing as part of the collaborative participation agreement you’ll sign as part of the process, have committed to seek a good faith result acceptable to both parties.  You can find more about some of the ethical rules which define the Collaborative Divorce process and your attorney’s conduct in the process by following this link — “What is a Collaborative Attorney.”  Although whether in litigation or collaborative law each spouse’s approach is of course vitally important, but still the conduct of your attorney, and more importantly the way your spouse’s attorney conducts him or herself will very much affect also what the whole process is like.

In litigation your attorney will need to be sure well in advance of a trial that all needed discovery has been completed. When an attorney makes a discovery demand in litigation, the other side has 30 days to respond; then if there are objections it can take multiple months to get a hearing date to get those objections resolved.

You can’t wait until the last minute for this, because Judges often are not receptive to postponing a trial because discovery is not complete. Judges have large caseloads and have rules regarding how long a case should be pending on their docket, and a typical response to a request for more time for discovery close to a date of trial, would be the Judge asking why discovery hasn’t already been completed. And trial dates can be imposed by the Court – once a case has been pending for 6 months or so, Judges will generally schedule something called a Case Management Conference to check on the status of the case, and often at that hearing will schedule mediation if it has not occurred, and also a trial date.

A Judge may be receptive to a request for more time for discovery, but often not if the case has been pending for months, for example while you’ve been trying to settle the case. All of this means that when you are in litigation, you often have to be all in – get discovery, business valuations, vocational evaluations and whatever else you need done, if you don’t want to lose the opportunity.

Part of the reason, in my opinion, that Judges sometimes deny requests for more time is that it puts pressure on the parties to settle, which is not necessarily, always a bad thing; but it is a bad thing if you are pressured into a settlement because you haven’t had a chance to acquire all of the proof you need to know what your spouse’s income, assets, etc. are, or a vocational evaluation to establish a spouse’s earning ability.

So, all of this and more drives the high cost of litigation, and it is all done under threat – the threat of what happens if you don’t get the proof you need, and the threat of what the result will be at trial.

At this point, when discussing discovery I’ve mentioned mostly documents to obtain and valuations. Often and almost always if a case proceeds to trial, when there are significant issues, there will be depositions to allow the attorneys to hear what the experts and other witnesses have to say, in advance of the trial. Resulting in more costs. Typically, there are also interrogatories addressed by each attorney to the other party – which are a series of questions to answer in writing, under oath and penalty of perjury.

In a collaborative case, there is a process of putting together the financial statements and information necessary to analyze the financial issues in the case, but it is shepherded by the neutral financial professional.

To be continued in next post.


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