When people ask me what is necessary in order for a mediation to be successful, my response is “a willingness to cooperate and negotiate in good faith.” These are words of wisdom from my mediation mentor. If the people who walk into my room have even a modicum of intention to that purpose, mediation is possible. Without it . . . well, you know.

Prior to mediation, couples do not have to have agreed to anything, see eye to eye on the issues or necessarily want the same things. What they do need is an intention to work together, plain and simple. When they do, magic can happen.

However there are times when it becomes clear that one (or both) of the parties may be participating either in a disingenuous or self-serving way. In that case, the possibility to create a mutually agreeable outcome is rather slim.
 
“Hoist with your own petard” is a really an interesting expression, peculiar in that most of us have no idea what a petard is and why would we hoist ourselves with it once we did?! Moreover, what could this possibly have to do with mediation?
 
Let’s start with the definition: Webster’s dictionary defines petard as 1) a metal cone filled with explosives, fastened in ancient warfare to walls and gates and exploded to force an opening (in other words, a bomb); and “hoist with (or by) one’s own petard” is to be destroyed by the very device with which one meant to destroy others. In other words – a sort of self- sabotage. In either case, it is a self-destructive venture that unfortunately, is not often seen as such at the time.
 
In my mediations, I’ve seen this phenomenon from time to time. Perhaps in an attempt to gain control of a situation or when we feel that our security is at risk, a knee jerk reaction can be to hurl any threat or do whatever we deem necessary to get our way and preserve what we feel is rightly ours. And in that attempt is often a risk to our own security (financial and otherwise) and well being. Thus, we hoist ourselves by our own petard!
 
A case in point is a mediation I had with a couple a few years ago who I will call Jason and Jill. They had three children with the oldest one having severe special needs. This had put a particular strain on their relationship. I believe this marriage would have ended regardless, but the stress of coping with the requirements for their children, especially the special needs child, and their different approaches to dealing with the disability, probably precipitated the end sooner than later. The pressure on both of them was palpable and I could see that Jason was really having a hard time dealing with his daughter’s disability.
 
Jason was desperately trying to hold onto the house, which he could ill afford. He didn’t want to sell it because it infuriated him that he would not be able to recoup his investment due to the housing recession – a situation many couples are facing these days. The reality was that in holding onto the house, he would be “house poor” so the need to explore other options was important. Jill was planning to move in with her parents who could assist with the care for the children. However her name was on both the mortgage and the deed so she had a vested interest in the decision about the house.

Jason’s upset and anger over the situation was causing him to lose sight of so many things. He refused to discuss maintenance, claiming that he had no money to “pay her,” but were he to consider other options for the house, relieving himself of the financial burdens of the mortgage and utilities, he could provide the maintenance Jill needed.

Clearly Jason had his own idea about the outcome of the mediation and I was beginning to sense his resistance to anything that did not coincide with that idea. I suggested that we explore the possible options for the house to see which might have the least ill effect on both of them. He balked but Jill wanted to develop some strategies, so on the board went the following options:

• Short sale the house.
• Allow the house to go into foreclosure.
• Consider a renter to share the house with Jason for a period of time to assist in paying down the mortgage. Then, incorporate a time frame at which point Jason would refinance the house in his own name.

With these options defined, I encouraged them to consult with a real estate attorney who could advise and guide them about which approach (or possibly another one that we did not consider) would ultimately benefit them both.

Jason would hear none of it. He said all of this was a waste of his time, he didn’t have the money to hire a real estate attorney and moreover he knew what needed to be done. He would just hold onto the house, do whatever he had to do to keep it and take his chances in court.

I attempted to explain all the potential liabilities of litigating (the time it would take, the money it would cost, etc.), but he was either unwilling or incapable of seeing beyond his own immediate self-interest. By doing so, he put so much at risk not only for himself but especially for their children, which results in everyone being hoisted by his petard!
 
When you come to mediation, simply bring your intention to work together, and leave the petards at home!
 
 

If you know anyone who would be interested in reading this blog, do not hesitate to forward it. Please feel free to use the Comments Box below to ask any questions, to comment, or to request more information.

Ada L Hasloecher

Divorce Mediator / Center Founder

Divorce & Family Mediation Center, LLC

Phone: 631-585-5210

eMail: Info@DivorceandFamilyMediationCenter.com

How Do We Get “There” Together?

In Part 1 of the “Financial-Emotional Conundrum” I touched on how the emotional aspect of our nature can often rule our responses to the many situations that either we bring to life or that life brings to us. One of the biggest, our financial situation, is frequently ruled by emotions.

When couples are considering a separation, one of the most challenging and important areas to be explored is how to allocate the available resources (money) so that both parties and the family have enough to live on. This can be a great source of emotional anxiety as the partners may feel that their safety and security is about to be threatened. When this happens, logic takes a back seat, feelings overwhelm and the fight or flight instinct kicks in.

One of the great benefits of mediation is that the process itself allows the couple to take a step back and look at the whole picture together. We put a little air around us as everyone’s needs are considered and addressed. We look at things from several points of view:

• How have you run the family finances in the past?
• What are the current needs?
• How do we accommodate those needs once the household is split?

The thing to keep in mind is that we earn what we earn, and unless there is another avenue of funds coming in, we live on what we take home in our paychecks, making ends meet as best we can. This is what we do when we are married and it will not change when we are separated. Although the parties may value things differently (which may be one of the reasons the relationship is no longer working), they must take into account each other’s financial contributions in order to figure out the best way to allocate those monies for the sake of the whole, meaning the entire family.

If money was tight before, it’s certainly going to be tight when you separate. The rule of thumb is that when you split households you are going to live on 30% less than what was available before. Think about it – at the very least, there will be two mortgage/rental payments, two sets of utility payments, not to mention higher car insurance rates and cell phone plans (when you unbundle the family plan) and so on. All of these things need to be taken into consideration.

In my mediation process, I include a budget session early on. I give my clients a very detailed “post separation” budget form and ask them to take it home and consider every line item on the form and account for it in some way. In living our lives day to day, you would be surprised how many expenses, we forget about. As things come up, we just shell out the money and don’t give much thought to, among other things:

• Extracurricular activities
• Haircuts
• Take-out food
• Hobby expenses
• Birthday gifts for the children’s friends
• Lunch money
• Weekend vacations, etc.

And it all adds up.

When I work with couples for whom money is already stretched, they are usually more prepared for the financial picture that emerges when we look at post separation budgets. However there are many who come to mediation with what I call a “sorta, kinda” idea of what their expenses are. Once we start crunching the numbers, the true picture comes to light. In today’s economy, even households with two incomes are not a guarantee that there will be enough to support a standard of living that partners are used to or feel they need/deserve/are entitled to, etc.

Together, we look at the post separation budgets and if necessary, separate the essentials from the non-essentials. Then we account for each spouse’s income, incorporate the child support calculations, maintenance (if appropriate) and begin exploring the various options to accommodate everyone’s needs going forward.

The reality is that things are going to change and working together, with the guidance of a mediator, to make the best of those changes is the way to go. By brainstorming ideas, teasing out the options, and thinking out of the box (you would be surprised at some of the amazing solutions people come up with) the likelihood that the parties will be able to live with, and within their agreements is much higher.

Ada L Hasloecher

Divorce Mediator / Center Founder

Divorce & Family Mediation Center, LLC

Phone: 631-585-5210

eMail: Info@DivorceandFamilyMediationCenter.com

How Does The Budget Look Once We Are Separated?

Good question!  One of the biggest concerns when contemplating a separation or divorce has to do with finances.  How are we going to afford to live separately and apart?  Some couples have already thought it through and considered it to some degree, but there are many seemingly inconsequential details that have to be taken into consideration.

I believe that before we can move forward in any meaningful way, one of the most important things to be done is to fill out, what I refer to as, a post-separation budget form.

I have a form that I give to my couples at the first session in preparation for the next session.  We walk through it together prior to them filling it out to give them some things to think about since they may be doing some projections.  For example, the housing and utility costs for both of them once they are living apart – what is that going to look like?  How will they split the credit card debt, if any?  What about unreimbursed medical expenses for the children like co-pays and dental (if not on their plan)?  All of these things need to be accounted for and included in their respective budgets. The main line items (and of course, in much more detail on the budget form) are:

The Budget

• Housing (mortgage, rent, taxes, insurance, etc.)
• Utilities (gas, electric, phone, cable, internet service, etc.)
• Household maintenance (house cleaning, repairs, pest control, etc.)
• Food (groceries, take out, pet food, etc.)
• Clothing (including dry cleaning, outside laundry if applicable, etc.)
• Auto expenses (payments, gas, maintenance, tolls, etc.)
• Health Insurance (co-pays, optical, dental, prescriptions, etc.)
• Insurances (life, disability, etc.)
• Loans and credit cards (student loans, etc.)
• Educational expenses (private school, college)
• Children’s expenses (child care, tutoring, sports, etc.)
• Recreation (vacations, eating out, hobbies, gym memberships, etc.)
• Personal care (haircuts, cosmetics, etc.)
• Miscellaneous (holiday and birthday gifts, charitable contributions, etc.)

Once these items are clarified and quantified, we can get a better picture of what the monthly needs are for both parties and open up a meaningful conversation on the best way to move forward.

Ada L Hasloecher

Divorce Mediator / Center Founder

Divorce & Family Mediation Center, LLC

Phone: 631-585-5210

eMail: Info@DivorceandFamilyMediationCenter.com

Divorcing? 15 Costly Mistakes

If you let emotions rule when your marriage breaks up, the financial fallout could last for years. These pointers can help you focus on what’s best for your future.

When you’re going through the pain and emotional battles of a divorce, it’s easy to overlook financial issues that can hurt you long after any hard feelings have healed. Here are 15 critical financial mistakes that you can’t afford during a breakup:

1. Becoming a financial victim. If you suspect your spouse is planning a divorce, now’s the time to make copies of all important financial papers, from property and investment records to bank statements, credit card bills and tax returns. Worried that your estranged spouse may liquidate or re-title marital assets? Notify the holder in writing and get a court restraining order. Watch out for cash in joint checking or brokerage accounts, and protect the cash value of your life insurance.
2. Not considering mediation. If assets are moderate, joint custody is workable and your spouse is agreeable to a fair settlement, mediation will save thousands of dollars in legal fees and emotional aggravation, and provide more flexibility than an adversarial legal process. Mediation won’t work if one spouse is hiding assets or income, or is unwilling to consider the needs of the other.
3. Hiring a combative lawyer as punishment. This is a bad idea for two reasons. First, except in extremely egregious cases, divorce settlements are determined by equitable-distribution laws, and courts will not punish your ex-spouse financially for being a bad person. Second, your attorney assumes carte blanche to increase hours spent on your case. High divorce costs mean less money left over for living. Treat divorce as a business arrangement, and get your revenge by living well post-divorce.
4. Failing to recognize your enemy: the Internal Revenue Service. Work with a divorce financial planner or tax accountant to minimize the total taxes you and your ex will pay during separation and after divorce, and share the money you save. Don’t forget that both parties are liable for taxes due as a result of audits on joint returns. Don’t count on the innocent-spouse rule to protect you.
5. Not producing an accurate budget. Invariably, clients underestimate or omit expenses when they produce their initial budget for temporary maintenance, and then later on in the divorce process they complain about being unable to pay bills. Use a financial professional to help you produce an accurate and complete budget.
6. Not evaluating a divorce settlement on an after-tax basis. The bottom line is the share of marital assets you get after the tax man gets his. Say your spouse handles all the investments and offers to split them 50/50. Sound fair? I suggest you look at the value of your assets relative to your spouse’s on an after-tax basis. Then decide if you like the deal.
7. Failing to use computer models to evaluate settlements. If you are trying to decide whether a divorce settlement is equitable and workable, you certainly want to know how you will be doing financially three, five or 10 years down the road. There are many interactive factors you must consider, including assets, incomes, budgets, maintenance and child support, taxes, retirement plans, investments and educational expenses. Specialized divorce computer models can produce comprehensive and realistic analysis of your post-divorce lifestyle.
8. Bringing an emotional attachment to assets. The marital residence, the pension you earned, a painting purchased during your marriage — these assets bring an emotionally charged debate to divorce negotiations. The fact is many women can’t afford the family home on their own. A house is an asset that has a low return on investment (real estate appreciates at the rate of 2% or 3% annually) and is a major cash expense (mortgage payments, taxes, repairs, heat and electricity).
9. Using your lawyer as a financial planner, therapist or messenger. One woman I spoke with ran up $35,000 in legal fees in just two months. Arrangements for her husband’s parental visitations were made through their matrimonial lawyers. Attorneys generally charge $200 to $300 per hour ($450 for partners in well-known New York City and Los Angeles matrimonial firms) and are not skilled therapists or certified financial planners. If you need emotional support, career counseling or financial analysis, utilize qualified professionals and save big money in fees.
10. Accepting a settlement that isn’t as good as it seems. Both spouses and children must make compromises in their lifestyles after a divorce. A settlement that does not give one spouse enough money to live on is likely to go into default in the future. Be fair, but verify the numbers. Get payments upfront whenever possible, even if you get less in total. Secure all payments with assets and insurance.
11. Disregarding the impact of inflation. The effects of inflation on the cost of a child’s college education 15 years in the future, or retirement 20 years hence, can be dramatic. The rule of 72 is a simple way to judge the impact of inflation. If the inflation rate is 3%, the rule of 72 states that prices will double in 24 years (72/3=24). College costs at 5% inflation will double in 14.5 years (72/5=14.5).
12. Not waiting until a wife is eligible for her husband’s Social Security. If a couple is married for 10 years or more, a wife is entitled to receive half of her ex-husband’s Social Security at retirement. The husband’s Social Security payments are unaffected. It’s ironic that the average length of marriage for people who get divorced is 9.6 years. Waiting just six months longer will increase retirement options for a wife with no reduction in her husband’s payments.
13. Forgetting to update estate documents. After heavily contested divorces, many people forget to change the beneficiaries on their life insurance policies, individual retirement accounts and wills. The result is that ex-spouses end up inheriting estates the decedent may have intended to pass along to children, a new partner or a favorite charity.
14. Failing to adequately insure the divorce settlement. Premature death or disability of your ex-spouse can result in loss of maintenance, child support, college tuition or property settlement. Life and disability insurance can guarantee your payments and your family’s security. Also, don’t ignore the high cost of purchasing individual health insurance.
15. Failing to develop a financial plan. One indisputable fact of divorce is that two households cost more to operate than one but income is unchanged. Many people start their post-divorce lives not fully understanding that their settlement must last a significant amount of time — perhaps the rest of their lives. Financial planning can help people transition from married to single life by prioritizing financial goals, developing realistic expectations and producing written plans for allocation of financial resources.

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