In a collaborative divorce, both clients are represented by their own attorney. In many instances, it is also recommended that clients hire the services of a neutral financial and one or two mental health professionals (divorce coaches). In the collaborative process, the clients and their attorneys sign an agreement allowing the clients’ divorce professionals to assist them as long as they do not seek court action. By not going to court, what I have found is that clients save, on average, about 50% of the costs of litigation. This is due to a number of factors. As an example, the clients provide documents voluntarily rather than through “Demands for Production of Documents.” Another example is when information is required, a professional simply calls the client to discuss that information, rather than having to rely on deposing a party for information.
Also, in the collaborative process when there is a meeting to discuss settlement options, everyone starts on time. In the litigation process, I have witnessed clients and their attorneys, forensic accountants and other witnesses, waiting for hours, if not days, to be heard by a Court because other cases have priority status. On occasion, the Judge may tell attorneys that the court will not hear their case, as the parties “need to settle,” thereby generating higher and higher fees as clients are forced to come back to Court again to be heard on another day. However, as with many major life transitions, the amount of actual “savings” is a relative term. There is an old expression: “never step over a dollar to get to a dime,” Sometimes, cutting corners to save some money, actually turns out to cost more.
I have been practicing in divorce for over 30 years as a qualified forensic CPA and in the collaborative field as a joint neutral financial for over 13 years. During the time I have practiced in the collaborative process I have encountered many examples of clients making short-sighted financial decisions, which winds up costing more in the long run. For example, I once had an attorney call me for an estimate to calculate the separate and community property interest in a real property. I provided my estimate of $1,000, which the clients declined. I learned several months later from the attorney that the clients required four additional meetings with attorneys and coaches to come to agreement on this one issue; clearly an expenditure far greater than what I had originally proposed. While it is certainly true that emotions play a material part in divorce process, adequate financial data can often provide clarity to temper these strong feelings.
In another example, I was asked to perform a business evaluation for collaborative clients. One client and his attorney elected to use “a rule of thumb” evaluation for the business involved, a much more general approach, not necessarily resulting in an exact evaluation for a specific business because I provide the “rule of thumb” at no cost. The clients were satisfied with the “rule of thumb” approach and agreed upon a “fair value” for the business using three months of annual gross receipts. Although the husband in this case may have “saved fees” by not having a complete evaluation for their business, in the long run, he may have paid out far more in an equalization amount than the cost of my fees.
I write this because around the same time I was hired jointly to value a very similar business which resulted in no value. However, in the collaborative client’s view, they were comfortable with the “rule of thumb.” The challenge, often, for collaborative professionals, is to remember that it is always “the clients’” divorce. The collaborative process, if used wisely, affords a wider opportunity for clients to choose among various options in making major life changes with the greatest degree of informed decision making.
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