A Divorce Mediation Case – Part 4 of 4: Agreements Reached & Reviewing the Costs

Bill and Angela have come a long way in handling their own divorce.  We have been with them through: The Decision to Try Divorce Mediation and the Consultation (Part 1); the Sessions on Parenting, Income & Expenses (Part 2); and then the sessions dealing with Assets (Especially the House) and Debts (Part 3) in which perhaps their biggest disagreement emerged, along with the strong emotions that came with it.  Here we will a) be with them briefly as the mediator helps the parties deal with remaining issues; and, b)    conclude by taking a look at the money the couple spent on mediation.

February 25th, 2016 – Session #5

  • After getting a value for the house, the spouses talked about other matters regarding the home. Now that the question of how much the house was worth had been answered, a serious disagreement remained about how much of that value belonged to Bill and to Angela; Angela was arguing for a 50/50 split, while Bill believed that he was entitled to a higher percentage due to work he had done on the house, and the increased value that resulted from that work.
  • Angela said that Bill was just making things difficult; that he knew she could buy him out at a 50% split, but couldn’t at any more than that. Bill denied this.

 

  • The mediator asked if they wanted to take a short break; neither one did. Then the mediator asked for more information that might enlighten the discussion. More information was shared, but no agreement on the house was reached.

 

 

  • The mediator brought up other matters, including:  filing taxes, whether/how to share in the case of a tax refund, or an audit; how to handle costs for writing the agreement, review attorneys and the court filing fee.  Angela and Bill reached agreements on these issues relatively easily.  though both were still upset, and Angela especially was concerned about dealing with the house.

 

  • The session ended, both still upset, and with Angela especially concerned about dealing with the house.

 

March 10th, 2016 – Session #6 (the last session)

  • On March 10th, Bill and Angela reached an agreement on the house, and tied up the remaining loose ends. Bill acknowledged the importance of the house not only to Angela, but to the children as well. And since Angela would probably be keeping the house for many years, during which time some expensive repairs were likely (on things that Bill didn’t have the skills to fix, though he was willing), he could come down on the percentage that he was asking for.  Angela expressed appreciation for the work Bill had done on their home, and for his willingness now to accept a lower percentage (than he had demanded earlier).
  • After further discussion, Angela proposed that either: a) Bill walk away with more of the assets than they had already agreed upon; or, b) that Bill take a small percentage of the house upon its eventual sale, which would likely be after their younger child graduated from high school. Angela agreed that she’d have to pay Bill that percentage from some other source of money that she would hopefully have at that time, or sell the house to pay him while incurring the expenses to sell the house.
  • The spouses reviewed their assets and talked further, ultimately deciding that Bill would take a greater share of the assets; an amount that Angela agreed she could live with.

And so, the mediation ended.

As previously mentioned, the “separation agreement” will need to be written. Bill and Angela have been advised by the mediator to each meet with a lawyer to review the separation agreement with them before signing it, which they have agreed to do.  Shortly after that, the separation agreement can be filed with the court.

So what did it all cost?

Mediation Fees:

  • $     50        Consultation
  • $3,300        11 hours @ $300/hr

$3,350        TOTAL

 

Other Expenses:

$1,500        Separation Agreement (needed whether people mediate or not)

  • The fees charged by an attorney to review the separation agreement should be relatively low, as this review is the only job that the lawyer will be doing for the client. There are no court motions, no depositions, no trial (and so no trial preparation), etc.
  • Court filing fee (needed whether people mediate or not)

In mediation (as in litigation), there can be other expenses, such as when spouses decide to hire an expert, such as a financial planner.  But, contrast a mediated divorce with a litigated one, and the difference in cost is often quite dramatic.

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All blog posts are for information purposes, and should not be considered as legal advice.

A Divorce Mediation Case – Part 3 of 4: Assets (Especially the House) and Debts

In my previous posts, I wrote about The Decision to Try Divorce Mediation and the Consultation (Part 1)  and the Sessions on Parenting, Income & Expenses (Part 2).  I continue here as the mediator assists Angela and Bill in regard to their assets and debts.

January 7th, 2016 – Session #3

  • The next session takes place over a month after the previous one.  Meeting earlier hadn’t been possible, or at least practical.  Bill had a lot of financial information to gather in regard to assets and debts (Angela also had, but less), and then there were the holidays.
  • The mediator asks about what has been happening over the past six weeks. Learning that there haven’t been what either party considers significant changes or problems, the mediator asks Angela about the clothing expenses discussed at the last session. Angela gives a new (and lower figure), which Bill accepts as accurate.
  • With income and expenses taken care of, the mediator works with the couple on their assets, again writing the figures on a flipchart. Angela and Bill both say that the numbers are correct. They quickly come to agreement on how to deal with the bank accounts, retirement money and other investments. There is a small dispute over the cars they own, which the couple quickly resolves. The big issue is the house. Angela would like to keep it, but buying out Bill may not be possible. Bill says that Angela can have the house, but she’d need to pay him a fair price. There is some discussion regarding the house. The mediator asks whether Angela has checked into getting a mortgage. Angela says she hasn’t, and Bill says that since a buy-out may not even be possible, maybe it would be best to go on to the next issue; Angela can do some investigating, and then they can come back to the house question. Angela says that is fine.
  • Having reviewed the asset information, and having reached many tentative agreements regarding their assets, Angela says that she wants to continue with the session, but only for another fifteen minutes, as she has to pick up their daughter from a friend’s house. Bill agrees and over the next quarter of an hour, the mediator begins helping them share the numbers on debts/liabilities.

January 28th, 2016 – Session #4

  • The spouses arrive.  They continue sharing information on debts, and then review it with the mediator.
  • They reach a decision on how to handle the credit cards, the biggest debt aside from the mortgage on the house. They agree on several other debt-related issues as well.
  • Angela begins to talk about the house, saying that she would be able to get a mortgage. Discussion continues on the house, when a disagreement arises concerning the value of the house. Two disagreements, actually. One dealing with the actual value of the house – the fair market value; the other with what percentage of that value should go to Bill; Angela had assumed that they each had an equal share, but now Bill is asking for more.  Angela’s surprise quickly turns to anger.  The mediator intervenes when it becomes clear that a productive conversation about the  matter isn’t possible at this times.  He helps the spouses turn their attention to finding out the house’s actual value, which both agree is necessary.  After a lengthy and somewhat heated discussion, Bill and Angela agree on how to have the house valued, in a manner that they can both accept.
  • The spouses say they would like to talk about child support. They’ve managed to discuss this on their own and have come up with a plan. The mediator says that this is good news, and asks for the details. The mediator also tells them about the Child Support Guidelines; that NYS requires parents to learn what amount of child support the guidelines would require; even if the parents decide not to follow the guidelines. Angela and Bill share their proposal. They learn from the mediator about the guidelines and decide that their own agreement is better for their family.

Next time:  A Divorce Mediation Case – Part 4 of 4:  Agreements Reached & Reviewing the Costs

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All blog posts are for information purposes, and should not be considered as legal advice.

What if clients make choices that I wouldn’t? Part 3: Informed decision making in mediation

I’m working with spouses, assisting them through the divorce process. They’ve come to an agreement that on a personal level makes me uncomfortable. That is to say that one of the parties has decided to do something that I wouldn’t.

As their mediator, what do I do? The short answer is ‘Nothing’, but let me explain with the help of an example; I’ll use the scenario that I set out in my previous posts on Informed Decision Making in Mediation.

Husband and Wife own a home.

  • Wife says to me:  We have a house that we bought when we got married. I’ll be buying him out, and paying him a million dollars.
  • Husband says:  Yeah, that’s what we’ve decided on.

As part of the mediation process, we have gone over the couples’ finances. I quickly learn that Wife will not be able to afford the house.

Wife tells me that she expects to get a significant raise at her job shortly. In the meantime, she is prepared to draw on savings. If the raise doesn’t come through, Wife understands that she will probably have to sell the house within two years. That would likely mean losing money, and maybe a lot of it. But Wife is prepared to take the chance. Wife says that, “If I have to sell, it won’t ruin me.”

Now pretend that I – the mediator – wouldn’t voluntarily put myself in this situation; that I am more conservative when it comes to money than this Wife is. Maybe this means that, if I were in her shoes, I would look to rent or buy a place I knew I’d be able to afford; otherwise, I wouldn’t be able to sleep at night because of the worry.

Do I discourage the spouses from signing their proposed agreement because I think it would be ‘wrong’, at least for me?

No.

In mediation, parties are free to make their own decisions. In fact, they need to; I won’t make the decisions for them. As a mediator, I don’t need to like or agree with the choices that the spouses make; rather, I need to ensure that they have enough information to make their decisions.

In this example, the clients have reviewed their expenses and income, assets and debts. They are both informed, which means that I have done a big part of my job.

[Note: I would probably ask Wife about other potential sources of money, if she were to need it; and, raise the possibility of her meeting with a financial expert. I might ask whether it would be possible for her to speak with her boss about the chances of getting that raise she is expecting, and if such a meeting would make sense for her. But it is the parties – in this case the Wife – who answer these questions and decide what to do.]

Next time:  What if a client refuses to provide information?

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Informed-decision making in mediation (Part 2)

In my previous post, I set out the following type of situation, to emphasize how important it is to have information before making major decisions.

You find a great house to buy.  It has so many rooms!  What great condition it’s in!  What a bargain!!

Then, a week before the closing you learn that the property nearby has been zoned for a sewage-treatment plant. 

Does having this new information matter to you?  Probably it does, and you will offer a lot less money for the house, if you still want it at all.

In a divorce, spouses are making vital decisions about their lives, whether or not there is a marital home to consider.  And so, in a divorce case, the mediator will have the parties gather and share information. Additionally, the mediator work with clients to make sure that they understand financial and other information.

Let’s return to the situation I posed yesterday, where the spouses have a house, and one wants to buy out the other.  To learn about the clients’ knowledge and understanding of what they are proposing, I would ask questions that may include the following:

  • How much is the house worth, and how did you come up with that amount?
  • Is there a mortgage, and if so, for how much?
  • Where will you get the money for the buy-out?
  • Will the buy-out be made in one payment? More than one? When?
  • How will the mortgage be paid after the buy-out? Where will that money come from?
  • How much are the utilities?
  • Does the house need much work, and if so, how will that be paid for?  The roof?  Boiler?
  • Do you want/will you be able to get the house in your name alone?
  • What about the capital gains tax?
  • What are your other expenses, and how will you each handle them?

Let’s say that these clients have answers to my questions.  Both spouses understand the finances, have a realistic plan going forward, and are aware of the implications of their proposed agreement.

As a mediator, I’m satisfied with their agreement.  (Of course, there are other matters for the spouses to decide, and many of them might have an impact on their buy-out plan.)

In my mediator role , I am much less interested in what decisions the parties make, than I am in whether the parties have a very good idea of what they’re doing, and what the consequences could be.  In other words, that their decisions are ‘informed’.

 

Next time:  What if clients make a choice I don’t like?  What if their agreements won’t work?

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Nice house. Great price! But, did you know about the airport? Informed-decision making in mediation(Part 1)

Almost everyone, I would think, is willing to put in time and effort before buying a new home.  There are a lot of questions to be answered:  What condition is the house in? What is the neighborhood like? How are the schools, shopping and public transportation? Are houses of worship nearby? And so on. A house that you would consider ‘a steal’ at the price of one million dollars might seem overpriced at $200,000, if you were to learn that a waste-treatment plant or airport is about to be built just up the road.

You would want to know about that new development, right?

The point is that, when making big decisions, it is important to have enough information so that the decisions will be good ones. In a divorce, spouses are often making some of the biggest decisions of their lives, in many cases including ones about their home. Fortunately, in divorce mediation, ‘informed-decision making’ is a pillar of the process, and my next few blogs will be devoted to this subject.

As I’ve discussed in another post, it is the parties who make the decisions in mediation, and not the mediator. But as a mediator, I work with clients so that their decision making is ‘informed’.

What does this mean?

Example: Husband and Wife meet with me. It is their first session.

  • Wife says to me:  We have a house that we bought when we got married. I’ll be buying him out, and paying him a million dollars.
  • Husband says:  Yeah, that’s what we’ve decided on.”

As their mediator,do I have a problem with their agreement?

No, at least not yet.

So should I respond by saying, “That’s great! Let’s move on to the next issue.”?

No!

Why not?

Because by doing so, I wouldn’t be checking with the parties as to whether their decisions are informed.

So, I’ll ask them questions perhaps beginning with:

  • How much is the house worth, and how did you come up with that amount?
  • Is there a mortgage, and if so, for how much?
  • (to Wife) Where will you get the money to buy your husband out?

Next time:  More questions that I’m likely to ask clients; and, working with spouses who have solid answers.

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All blog posts are for information purposes, and should not be considered as legal advice.