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.

The Differences Between Divorce and Legal Separation?

In most ways, a legal separation is the same as a divorce and the procedure in the court is virtually identical. Both include final custody, visitation, child support and spousal support orders, and all the family assets and debts are permanently divided. In both types of cases, it is possible to get temporary orders about support and children’s issues early in the case, if needed.

Some of the differences include:

Divorcing couples must wait a minimum of six months after filing the Petition and Response (or filing a Petition and serving it on the other party).There is no waiting period to finalize a legal separation.

The parties cannot restore a former name/maiden name in a legal separation, but it can be done in conjunction with a divorce case. Names can still be changed through the regular civil process at any time.

Both parties must agree to file a legal separation. Either party can file for a divorce without the agreement of the other, including converting a legal separation case into a divorce case before the case is finalized, or filing for a divorce sometime after the legal separation case is over.
A divorced spouse loses “surviving spouse” benefits under the probate codes; a legally separated spouse retains those rights.

The major difference is that if the parties have a legal separation, they are still married to each other after the court case is over. They can remain legally separated indefinitely, or until one or both choose to divorce.

Why Do Couples Choose Legal Separation?: Some couples choose legal separation because of religious beliefs, or moral reasons, or they are just not ready emotionally to divorce. A few choose legal separation so they can still file joint tax returns as “married” people. Most often, couples choose legal separation so one person can keep health insurance coverage from the other spouse’s employment (the availability of which is determined by the insurance carrier, not state law). Employer health insurance may continue after a divorce under COBRA, but the coverage is limited and is often very expensive.

What Happens at a Family Court Status Conference?

The court automatically sets a Status Conference (STC) in all divorce cases to take place approximately 3 -4 months after the case is filed. When parties choose to use mediation to resolve the issues in a divorce or legal separation, the mediator can file a stipulation (agreement) postponing ("continuing") the STC for up to a year to allow the parties an opportunity to finish through mediation without going to court.

Parties that represent themselves can usually postpone an STC a couple of times by calling the court clerk on the phone (it can vary by department). Eventually, the court won't let that happen anymore and will require you go in to the courthouse for the STC. This can take a half-day or more. Typically, parties can personally appear once or twice more before the court will set a Case Management Conference ("CMC" - which is not much different than an STC, but parties will typically see a judge instead of the facilitator). The court does not decide anything substantive about the case at these hearings (who gets what, etc.), but uses them to keep track of case progress.

The longer a case goes, the more pressure parties will likely get from the court to finish up. This usually comes in the form of setting more frequent court dates and deadlines. Sooner or later, the court will assume that the parties will not --or cannot -- finish on their own, and will set a trial date or dismiss the case altogether.

LEGAL SEPARATION vs. DATE OF SEPARATION

Many callers believe they are "legally separated" after a Petition for divorce or legal separation has been filed with the court. This is a common misconception because the court forms require a "date of separation" to be entered. It is important to understand the difference between a legal separation and the date of separation.

A "legal separation" is a formal court procedure that is virtually identical to divorce. It divides the parties' assets and debts, sets support and children's issues, but in the end the parties are still married to each other. This is commonly done when couples are not sure if they want to divorce or not, for religious reasons, or so one person can maintain insurance benefits through the other's employer.

The "date of separation" is used in both divorce and legal separation procedures. It marks the theoretical end to the marital relationship, but not a final divorce or legal separation date, which the court orders at the end of the process. The date of separation is used to calculate the length of the marriage. It may also be relevant for certain financial matters such as characterization of community property versus separate property. The date itself can be hotly contested in some cases, but when parties participate in mediation the date loses most real significance if the parties are able to simply agree upon financial matters with the assistance of the mediator.

What does "In Pro Per" mean?

The law often uses archaic terms with which most people are not familiar in divorce proceedings. One of the most common terms, In Pro Per, appears on most court filings in divorce cases in San Diego. In Pro Per, or more specifically In Propria Persona, appears after the heading “Attorney For:” and literally means “for one’s self.” In Pro Per is used in California when a person acts as his/her own attorney in a legal dispute.

Filing In Pro Per does not mean you are limited in any of your legal rights, only that you are representing yourself in the proceeding. Many people choose to file In Pro Per for a variety of reasons, chief among these is cost.

IN DIVORCE MEDIATION YOU CAN AGREE TO DIFFERENT THINGS THAN A COURT CAN ORDER

When couples are getting divorced and rely on the judge to make decisions for them, the outcomes are more limited than when they reach their own agreements in mediation.

Lately, NCRC has had a number of divorcing clients who don’t want to sell their houses due to the current market conditions. In mediation, they can agree to continue to co-own it, but change the title from Joint Tenants to Tenants in Common. Then when they are ready later, they can sell it. In court, if the parties don't agree on what to do about the house, the court is likely to order that it be sold.

The point to take from this:

Mediation offers more flexibility with outcomes than a court can.