Is Divorce Mediation Appropriate for Couples with Substantial Assets and/or Income?

Divorce Mediation has Significant Benefits for Couples with Substantial Income and/or Assets

Non-adversarial, less stressful, cost effective
With a clear focus on the legal, financial and personal needs of the parties (and their children), mediation is the most non-adversarial and likely the least stressful way to get through a divorce. Upper-income couples frequently see the greatest benefit of a mediated—as opposed to court litigated—divorce. Couples with higher incomes often pay higher retainers to attorneys because of an assumption by the attorneys that if there are significant assets there will be significant conflict. Additionally, the more assets a couple has the more complex the issues may be, and dealing with this increased complexity in litigation dramatically raises the costs. In contrast, in mediation complexities can be addressed efficiently and effectively, without dramatically escalating the costs or the conflicts.

No matter what their income(s) and assets are, most people who are getting divorced are concerned about keeping costs down especially when their future is uncertain. Added to their personal situations, the state of the economy is another good reason that divorcing spouses are often cautious about spending money.

Mediation is private and confidential
Mediation offers the benefit of confidentiality, unlike a litigated divorce. Mediation sessions are private and confidential personal information is not discussed in open court. With mediation, financial disclosure forms listing assets, debts, income and expenses are completed by the parties and exchanged with each other, as required by law, but are not filed in the court’s public record. The parties may also choose to file a simple memorandum of their settlement agreement instead of the full (financially-detailed) agreement.

Experienced family law attorney/mediators
NCRC’s divorce mediators are experienced family law attorneys who can provide legal information to the couple about the relevant law, including division of property, support (both spousal and child) and if there are children, how they share the time with and co-parent their children. Many mediation participants have consulting attorneys, financial planners and other advisers, as needed, to provide them with sufficient information for decision making. Such professionals are welcome to attend the mediation sessions with their clients, subject to the other spouse’s agreement.

Financial benefits
Due to the shorter duration and lower costs, a mediated divorce offers a significant advantage in preserving assets for the parties and their children.

An average litigated divorce costs about $17,000 per person. A highly contentious divorce can easily cost over $100,000 and take more than a year to complete due to a protracted period of pre-trial motions, discovery, and the possibility of multiple continuances.

An average mediated divorce costs between $2,500 and $5,000—with the costs typically shared by the parties.

Flexible timeframes
The mediation process may be completed in as little as three to six months. But, couples needing more time to adjust can take more time. Appointments are set at the couple’s mutual convenience rather than based on the court’s and attorneys’ schedules.

Personal benefits
Due to the collaborative, non-adversarial nature of mediation, relationships currently under stress may not fracture entirely. Mediation may end up improving relationships because it facilitates direct communication between parties. Litigation is, by nature, adversarial and with each side paying an attorney to advocate on his/her behalf; the parties may lose this important opportunity for direct, healthy communication.

WHAT IS A QDRO?

Many parties in a divorce or legal separation have retirement account(s) that will need to either be distributed to one person or divided between the couple. In mediation, the couple will make the decision about how they want the plan to be divided (or not) and the agreement will become part of their Marital Settlement Agreement (MSA).
If the account will be divided, then a separate court order might be needed so that the exact amounts can be accurately calculated and the instructions can be forwarded to the company where the account is held. For some accounts, such as an Individual Retirement Account (IRA), no separate order is needed, and the parties can deal directly with company after the MSA is finished. Other accounts will require a Qualified Domestic Relations Order (QDRO) which is used by the company to split and/or make changes to the ownership of the retirement plan to give the spouses their share.
There are two main types of pension plans that need a QDRO. One is a Defined Benefit Plan -- 412(i) or cash balance plans for example. A defined benefit plan provides for specific monthly payout at retirement; usually a flat dollar amount or a percentage based on salary, years of employment, etc. A Defined Contribution Plan -- such as 401(k), 403(b), 457 plans, stock plans and profit-sharing plans-- involve contributions from the employee and/or the employer, which are invested and paid upon retirement in an amount according to the investments.
The QDRO is needed so that specific requirements in the IRS Code can be met. IRS rules change on a regular basis, and no two plans have the exact same set of requirements. Both can be very complex. For these reasons, NCRC does not prepare QDROs but can refer parties to specialists to help ensure the QDRO is done properly. Once the MSA is filed at court, then the QDRO can be prepared and filed. The final step is to submit the QDRO to the plan administrator so the actual division or transfer can take place.