Divorce Choices, Mediation and the CDFA

A decision to separate and consider getting a divorce can be the beginning of a long, emotionally draining, and expensive process.  While much of this is unavoidable, there are ways to reduce the economic and psychological burden if the couple is willing and able to cooperate for their mutual benefit, including for the benefit of any children.

Litigation is the most expensive process for obtaining a divorce. It is most appropriate when the couple (a) cannot work together in a civil manner to find a “fair” and mutually beneficial way to divide marital property and (b) can afford to pay for what may be extensive billable hours for separate attorneys.

Mediation and the Collaborative Process are two types of Alternative Dispute Resolution (ADR) that offer an alternative to litigation.  Both ADR procedures are cooperative rather than adversarial, assuming the couple can work together with various professionals whose job is to facilitate a mutually-agreed upon settlement. While either ADR process may be preferable to litigation, there are tradeoffs in choosing between these two ADR process. Relative to the more well-known process of Mediation, the Collaborative Process is somewhat closer to litigation, both in expense and individual representation. The Collaborative process entails having separate attorneys and, usually, separate mental health professionals for each party, but only a single Financial Neutral (described further, below). Since Collaborative team attorneys for both parties are present together at meetings, the divorcing couple hears their advice and legal opinions at the same time, which may make it easier for the parties to come to the same conclusions about what constitutes a fair settlement.

Mediation does not completely eliminate the need for attorneys in most cases, but it may substantially minimize the amount of time and effort they would need to spend on a case. In Mediation, the parties are assisted in reaching their own terms of divorce by a neutral third party trained in divorce matters. The Mediator’s background is usually that of an attorney, a mental health professional, or a financial professional.  Since much contention in a divorce involves the division of marital assets, the role of a knowledgeable, impartial finance professional as Mediator may be most helpful relative to the traditional adversarial role played by most attorneys.

The Financial Neutral’s role, whether as part of a Collaborative team or as a Mediator, is to help the couple:

  • Accurately and fully document their assets and liabilities;
  • Accurately and fully estimate their current and prospective living expenses;
  • Develop alternative and often creative property settlement agreements, and, where appropriate, future child and spousal support agreements that meet state and federal laws and standards.

If spouses cannot agree on how to divide property that is jointly owned, the courts will divide property (and debts) under one of two basic schemes: community property or equitable distribution.  The main difference is that in community property states there is an absolute 50-50 split of all property acquired during the “marital enterprise.” In equitable distribution states, more assets are considered “marital property,” but the split is not necessarily 50-50.

By definition, “fair and equitable” is not necessarily the same as equal. Maryland is one of about 40 states in which “equitable property division” rather than “community property division” is required.  In Maryland, under Section 8-205 “Granting of monetary award”, subsection (b) (11), after listing specific factors that courts will consider, it adds as a catch-all ”… any other factor that the court considers necessary and appropriate to consider in order to arrive at a fair and equitable monetary award or transfer of an interest in property… [emphasis added]”.

 In many cases one spouse has sacrificed his/her career for the other spouse, whether by helping the other spouse through school and/or by quitting paid employment to raise the children. In those cases it may not be equitable to divide the property equally.  Rather it may be appropriate to consider a number of other factors such as the length of marriage, and differences in age, wealth, earning potential, and health of partners involved, in order to achieve an equitable and fair distribution – not necessarily an equal one in the monetary value of marital assets.

This is where the role of a Certified Divorce Financial Analyst (CDFA) can be most helpful. What’s missing in most divorce processes is financial expertise. A CDFA can help clients determine the short-term and long-term financial impact of any proposed divorce settlement. They also provide valuable information on financial issues that are related to the divorce, such as tax consequences, dividing pension plans, continued health care coverage, stock option elections and much more. A CDFA also can help attorneys by helping the client make financial sense of various settlement proposals.

 This is also where Mr. Rosenberg’s long and varied professional experience provides an added dimension, whether providing financial analyses in support of a litigated divorce, or as a Financial Neutral in ADR cases, either as a Mediator or part of a Collaborative team.  In addition to holding the CDFA designation, Mr. Rosenberg has the added credential and experience as a Chartered Financial Analyst (CFA), the premier designation of institutional money managers, as well as being a Registered Investment Advisor.  In addition, as a Forensic Economist, Mr. Rosenberg has expertise in calculating appropriate compensation in cases of personal injury for people who have suffered the loss of past and future earning capacity in a particular job or profession.

Somewhere in the separation and divorcing process, each spouse typically will need to retain their own legal counsel.  A Financial Neutral Mediator cannot and should not dispense legal advice.  What Mr. Rosenberg can do and will do in his capacity as a Financial Neutral Mediator is to facilitate direct, face-to-face negotiations of issues related to property settlement, spousal support and child support, as needed. The end product will be a Memorandum of Understanding (MOU) that incorporates a proposed separation and property settlement agreement if such can be agreed upon by both parties. This MOU, which also may include a Parenting Plan if that is needed and can be agreed upon, would then be presented to their respective legal counsels, or in some cases, to a single counsel.  Legal counsel(s) would be responsible for refining the MOU into a legal form to be filed with the court.  Legal counsel(s) would also file any required Qualified Domestic Relations Order (QDRO) that is referenced in the MOU, in which it is agreed upon that a non-employee ex-spouse would receive direct payments, at time of divorce or when retirement payments begin, from the employee ex-spouse’s qualified retirement or pension plan.

Mr. Rosenberg would be happy to discuss with you, without cost or obligation, how he could be of assistance in your separation or divorce a Financial Neutral Mediator.  He is also available to provide financial analytical support to attorneys in litigated divorce cases. He may be contacted by email at jrosenberg123@gmail.com or by phone at 301-802-0617.