There are two aspects of the divorce process that can have huge consequences for post-divorce life: finances and timesharing. It’s not difficult to find horror stories regarding former spouses hiding money or extended custody battles. Depending on the state of the relationship between the divorcing partners, however, it may be possible to come out of a divorce with fewer battle scars. Collaborative divorce may provide the support necessary for a divorcing couple to better protect finances during divorce—and protect their futures.
Protect Finances During a Traditional Court Divorce?
In a traditional divorce, each party has its own experts and counsels. This includes financial advisors. The representatives for each party are focused solely on their client and ensuring their client gets their needs met. Each party is responsible for disclosing finances and for determining what their financial needs going forward are.
You may have heard of “community property” states in which the assets and debts of each party are considered joint assets and debts upon marriage. During the divorce process, these assets and debts are then divided. Thankfully, Florida is not a community property state.
Rather, Florida law recognizes the difference between nonmarital and marital assets and debts, where nonmarital assets and debts are those that pertained to the individual parties before the marriage. For example, in a community property state, if you started a business before you got married, then by law, that business would actually belong to both partners. In Florida, that business would belong to the party that began the business, though assets and debts accrued during the course of the marriage would be assigned to both parties.
Florida is an equitable distribution state. “Equitable” does not mean equal. Rather than dividing assets, property, and debt 50-50, the goal of equitable distribution is to divide them fairly. To determine fairness, a judge will consider each party’s income, their earning potential, the standard of living during the course of the marriage, the length of the marriage, and more. The judge will also consider what assets each party possessed before the union and what was acquired jointly.
Dividing assets and debts can get contentious, especially when one party isn’t forthcoming or willing to negotiate. Too often, a judge must make the final determinations. This can leave both parties feeling like losers in some kind of game. Afterall, we all want to have a say in the process. It can be a hard pill to swallow when someone else is determining the outcome.
Possible Financial Issues During a Traditional Divorce
The following are a few financial issues that may crop up during the divorce process.
Not Enough Forethought For the Future
During a court divorce, the focus is frequently on the present or the past. Not enough time is spent on considering the future in workable terms. While alimony and child support aim to provide assistance for the future, what the future will look like financially can still remain a big question mark. More planning is necessary to paint an accurate picture of future financial needs. However, because a traditional divorce is often concerned with putting an end to a marriage and divvying up assets and debts, too often, the involved parties don’t consider the costs of maintaining two separate households.
What if your spouse has a secret credit card or has been hiding debt? This kind of deceit can be shocking during a divorce and have huge financial implications for both parties. If one party is responsible for the majority of the couple’s debt, then it is imperative that the issue be raised with proper documentation and proof. This may help a judge determine that it would be unfair to split the debt equally and allow them to make the best determination possible.
During a traditional divorce, the tax implications of alimony, child support, the sale of the marital home, and other financial decisions are not always considered. This can lead to an unfortunate surprise come tax time. During the collaborative divorce process, taxes are part of the financial negotiations. This helps reduce the likelihood of a high tax bill and allows both parties to plan accordingly.
Paying for Kids College
Child support ends either when a child turns 18 or, if they haven’t finished school, when they graduate high school before their 19th birthday. For children with special needs who are unable to support themselves, child support may be extended indefinitely as long as the appropriate paperwork is filed during the divorce process. There is no provision that a parent must pay for college. For some divorcing couples, this can come as a surprise. While a judge cannot force anyone to fork over money for their child’s secondary education, an agreement can be made by the parents to spell out how their children’s college educations will be funded.
Special Note: Dealing With Pets
It may seem weird to lump our beloved pets in with our finances, however, that’s precisely what the state of Florida does. Pets are considered property under Florida law and fall under equitable distribution. The traditional court divorce will result in one party owning the pet. The other party will not have any rights or responsibility towards the pet. While we may feel our pets are an important part of our families, a judge is bound by current law. It is possible to create an agreement out of court to arrange for “joint custody” of a pet or to create a visitation schedule, though it will require both parties agreeing.
Dealing With Finances During a Collaborative Divorce
The collaborative divorce process is all about working together. While each party will still maintain their own legal counsel, they commit to sharing a financial neutral, a divorce coach, and any other specialists they’d like to admit to their team, such as a child specialist or a divorce real estate specialist.
Both parties are expected to provide the financial neutral with a complete picture of their finances. Part of the initial agreement signed when starting this process requires openness and commitment. There’s a recognition that it’s in everyone’s best interests to truthfully and openly provide the necessary financial documentation and to consider a variety of solutions for distributing property, assets, and debts.
A collaborative divorce is not bound by equitable distribution, however, legal counsel can help ensure that the division of property is appropriate for the situation. This really provides the separating parties with the ability to create solutions for their particular situation, rather than having equitable distribution imposed upon them by a judge. Some financial agreements reached through the collaborative process may mirror equitable distribution, though many may not.
During discussions with the financial neutral—which both parties will always be present for—current finances, income, potential future income, possible future taxation, and future expenses will be discussed. Child support and alimony will also be discussed if necessary. Both parties will need to create budgets for their post-divorce life. This allows the parties to really see what their future needs will be. This is essential for creating a fair agreement.
The financial neutral is trained in mediation, as well as finance, and helps divorcing couples keep an eye toward the future so that the agreements they make are sustainable and fair.
Possible Financial Issues During a Collaborative Divorce
The collaborative divorce process can also encounter issues, though often, parties are able to move beyond them thanks to the team’s mediation training.
The main issue that may arise during a collaborative divorce stems from one party’s dishonesty. Because the collaborative divorce process relies on both parties being open and voluntarily disclosing all financial information, if one person chooses to be dishonest and hide information, it can lead to an unfair financial agreement or derail the process and require that the parties seek a court divorce. If the process moves to court, each party will need to attain new legal representation as the collaborative divorce attorneys sign an agreement at the start of the process to only represent the parties in the collaborative process.
Another issue that may occur during a collaborative divorce is one party withdrawing from the process. The collaborative process can be emotional and difficult, though it is frequently more gentle than a traditional court divorce. However, if someone begins withdrawing from the process, withholding information, refusing to negotiate, or otherwise disengaging from their commitment to voluntary negotiation, the collaborative process may fall apart.
These outcomes aren’t common. Collaborative divorce attorneys and divorce coaches do their best to ensure that participants are willing to work together and want to use the process to separate.
Other Financial Considerations
Regardless of which divorce process you use, there are some financial considerations you’ll need to face. Don’t let them surprise you later—if you’re thinking about a divorce, it’s important to be as practical and realistic as possible.
Cost of Divorce
Even the easiest divorce has an associated cost. It’s important to note that your divorce will require some spending. In addition to any court fees, most divorces have at least two lawyers. Additional professionals, such as financial planners, therapists, or members of a collaborative team will increase the cost of the divorce. Keep this in mind when planning your future finances.
Returning to Work
Individuals who didn’t work before the divorce may find that they need to return to the workplace to make ends meet post-divorce. While alimony and child support may help reduce out-of-pocket costs for living expenses, they probably won’t cover all costs. Jumping back into the workforce may require new licenses depending on your job or childcare. This is important to keep in mind during the financial planning process.
If you are on your partner’s insurance policy, you will need to consider the cost of acquiring your own health insurance. Current prices can come as a shock, so make sure to plan for this during the divorce process.
Alimony and Child Support
Alimony and child support generally don’t last forever. To protect yourself financially, understand the limitations of each and plan for when they will end. Alimony will be dependent on the length of the marriage, the income of both parties, and the standard of living during the marriage. To learn more about the different types of alimony, visit our Alimony 101: Types of Alimony in Florida post.
Learn About Your Finances
Before getting a divorce, it is helpful to understand your current finances. Too often, one partner is in charge of the finances while the other is left in the dark. If you feel in the dark, make a point of learning about any investments and debts (like a mortgage or credit card bills) that are in both of your names. In the future, you will need to handle your own finances and be responsible for saving or investing money and paying your bills. Having a working understanding of your current finances can help you better plan during and after your divorce. During a collaborative divorce, inequity in financial knowledge can be addressed with the less knowledgeable spouse receiving a bit of a crash-course in the couple’s finances so the negotiations occur on even footing.
Is a Collaborative Divorce Right For You?
A collaborative divorce isn’t appropriate in every situation. The best way to determine whether a collaborative divorce may work for you is to consult with a Tampa collaborative divorce attorney.
For a collaborative divorce to work, both parties must agree to the process and be committed to it. Divorces in which domestic violence, drug use, or power inequalities are an issue may not be suited for this process. Each party must be represented by their own Tampa collaborative divorce attorney. Once both parties have legal counsel, they will work to build their team together, often from recommendations provided by the Tampa divorce lawyer.
If you’d like to learn more about your divorce options, speak to a qualified Tampa divorce lawyer trained in the collaborative divorce process. At Quinn & Lynch, P.A., our insight can help you better determine which process may be most suitable for your situation. Schedule a consultation today to get started.